Nasdaq pulls broader market down
By David Runk
The Wall Street Journal
Sept. 11 — Technology stocks dragged down the broader market Monday amid persistent worries about corporate profits and the euro's weakness against the dollar, outweighing strength in energy and financial issues.
THE NASDAQ COMPOSITE INDEX tumbled about 82 points after falling 119.94 Friday. The Dow Jones Industrial Average fell 25 points after sinking 39.22 points the previous session. Other major indexes were mixed Monday.
In the currency markets, the euro recovered somewhat but remained weak after falling to a new low against the dollar and the yen earlier Monday. The decline came after euro-zone finance ministers offered no measures over the weekend to support the currency. The dollar was lower compared with the yen.
Erik Gustafson, a senior portfolio manager for Stein Roe & Farnham, said the market was restrained by broad worries about how the Federal Reserve's interest-rate increases and the weak euro will weigh on corporate earnings. Investors are cautiously awaiting more preannouncements this month ahead of the third-quarter earnings reporting season.
"Clearly a lot of people are worried about the weakness of the euro, and how that weakness will translate into U.S. corporate earnings in companies that do a lot of business in Europe," Mr. Gustafson said. "That translates into a larger view of corporate earnings in general."
Mr. Gustafson said an environment of uncertainty led to the see-saw trading seen Monday, and such volatility is expected to persist. After a weak opening, stocks recovered somewhat. But softness in the technology sector dragged the broader market lower in afternoon trading.
Shares of Dow component International Business Machines dropped $5 to $124.50 Monday, dragging down the blue-chip average, after a Goldman Sachs analyst reduced revenue-growth estimates for the computer maker's third and fourth quarters amid concerns about the weakness of the euro.
Elsewhere in the technology sector, stocks were mostly lower as Internet and semiconductor stocks joined the biotech and computer sectors in negative territory. Dow component Hewlett-Packard fell $6.06 to $115.56 after it confirmed that it is the leading contender to buy the consulting arm of PricewaterhouseCoopers.
News of more consolidation in the financial-services industry helped support shares in the sector. Goldman Sachs rose $5.50 to $130.50 after it confirmed that it will buy Spear Leeds & Kellogg for about $6.5 billion in cash and stock. Dow component J.P. Morgan gained $1.44 to $165.44 Monday, after rising as high as $171.44 in midday trading, amid increased speculation that it is a takeover target following news that its financial chief, Peter Hancock, resigned abruptly.
Meanwhile, oil prices rose, sending oil stocks higher as the move by the Organization of Petroleum Exporting Countries to boost output by 800,000 barrels a day wasn't seen as enough to curb high oil prices. The broader energy sector advanced, and the Dow Jones Utility Average rose 1.8% to trade at record highs for the fifth consecutive session.
Among oil producers, Dow component Exxon Mobil rose $1.50 to $85, and oil-service stocks Schlumberger and Halliburton climbed. Meanwhile, Phillips Petroleum jumped $2.25 to $64.06 after the Sunday Times of London reported Chevron is in the final stages of talks to buy Phillips. Shares of Chevron rose $2.38 to $89.06.
Alan Ackerman, executive vice president and market strategist at Fahnestock & Co., said the market was lacking a broad catalyst to give it direction amid worries about how well corporate earnings will hold up in the second half. Investors also were awaiting fresh economic data later this week, such as the August producer-price report Thursday and the consumer-price data Friday.
Most observers on Wall Street expect the Fed to leave interest rates unchanged at least through the November election and possibly until the end of the year amid signs the economy is slowing to a sustainable rate of growth. The Fed has raised interest rates six times since June 1999 to ease inflationary pressures and slow the U.S. economy.
Outside the U.S., European shares finished mostly lower. In the Asian-Pacific region, stocks declined Monday. Hong Kong's Hang Seng Index fell 1.6%.
In major U.S. market action:
Bonds fell. The bellwether 10-year Treasury note was down nearly 1/4, or $2.50 for each $1,000 holding, bringing the yield up to 5.77%. The 30-year bond fell more than 3/8 to yield 5.73%.
The dollar was mixed. It traded at 85.74 cents to the euro and 105.97 yen to the dollar, compared with 86.82 cents to the euro and 106.08 yen to the dollar late Friday in New York. |
