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<<By the Wall Street Journal Online....
Nasdaq Falters
After Early Try
At Recovery Rally
By DAVID RUNK
INTERACTIVE EDITION
The Nasdaq Composite Index slipped into negative territory, giving back early gains logged in the wake of Wednesday's 7.06% slide. Blue-chip stocks continued to decline.
In late-afternoon trading, the Nasdaq composite was down 4.10 to 3765.50 after plunging 286.27, or 7.1%, to 3769.63 the previous session. Wednesday's drop was one of the composite's worst ever, leaving the index firmly in bear market territory.
The Dow Jones Industrial Average fell 145 points to 10980 after losses in big-name technology stocks dragged it down 161.95 points in the last hour of trading Wednesday.
Richard Cripps, chief market strategist at Legg Mason Wood Walker, said the Nasdaq composite doesn't appear to be ready for a full-fledged recovery. But some short-term gains following Wednesday's drop were likely.
"We're still in a very touchy area," Mr. Cripps said. "We have a bounce in store; we're oversold on the Nasdaq."
The Standard & Poor's 500-stock index rose 10.10 to 1457.08 and the New York Stock Exchange Composite Index dropped 5.70 to 648.60.
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Join the Discussion: What do you think is responsible for the volatility of technology stocks?
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Christopher Wolfe, equity market strategist for J.P. Morgan's private clients, attributed the Dow industrials' decline to a continuation of Wednesday's late-session drop. Market participants will be looking for clarity in earnings reports to guide trading, he said, but the markets likely will remain volatile in the short term.
"It's going to be a tough summer for the tech names," said Mr. Wolfe, who noted there will be opportunities for bargain hunting following the shift from technology issues. "A big driver has been liquidity, and liquidity has gone away."
Microsoft rebounded slightly Thursday, rising 1 5/16 to 80 11/16 in late afternoon trading after its shares led the technology sector lower Wednesday in the wake of a revenue estimate downgrade by Goldman Sachs analyst Rick Sherlund. But other tech stalwarts Hewlett-Packard, IBM and Intel -- all Dow industrial components -- traded mixed.
Mr. Cripps of Legg Mason said the market's upward momentum has been broken, reducing the chance that an immediate recovery is likely by the Nasdaq composite. That, and a seasonal trend that shows the second quarter as a difficult one for technology stocks, combined with an overabundance of new tracking stocks, means any bounce by tech shares will be a short-lived one, he said.
First-quarter earnings reports, flooding the markets this week and next, already have been discounted by the market, Mr. Cripps said. Investors have responded poorly to even positive earnings, especially from technology firms, which have faced high analyst expectations.
Investors will be watching for earnings from Gateway, expected after the close of trading Thursday. The San Diego-based company is the first of the major computer makers to report first-quarter earnings, and worries about slowing PC sales have hammered computer-related stocks in recent sessions. After a drop Wednesday, the Nasdaq computer index was up 59.70, or 2.7%, to 2254.18, while shares of Gateway fell 2 1/8 to 53 1/8.
Among Dow component stocks, General Motors edged up 1/16 to 87 9/16 after its results easily topped analysts' estimates. The auto maker posted a 14% drop in first-quarter net income, hurt by competitive pressures in North America.
And General Electric reported a 20% rise in first-quarter net income. The results matched Wall Street estimates, but its shares were down 5 5/16 to 151 7/16 amid the broader market decline.
Meanwhile, a report from the Labor Department Thursday that showed the producer price index rose 1% in March, matching February's increase, had little impact on trading. The gain was bigger than economists expected, though it was attributed largely to a 5.8% boost in energy prices, the biggest since October 1990. Excluding volatile food and energy prices, the index rose just 0.1% in March, down from a 0.3% gain in February. The rise in the core index met Wall Street expectations.
Although the lack of significant wholesale price pressures should reassure market watchers, the Federal Reserve is still expected to raise short-term interest when policy makers meet next month. Even though widespread price increases haven't crept into the overall economy, the central bank is concerned that torrid consumer demand could provoke an outburst of inflation.
Fed Chairman Alan Greenspan provided no hint about the direction of U.S. monetary policy in testimony before the Senate Banking Committee Thursday. His remarks concentrated on U.S. securities markets. The Fed chief expressed concern that traditional U.S. stock markets may soon become noncompetitive, but he cautioned against a government-mandated system to centralize stock orders.
In the credit markets, Treasurys slumped in response to a strong retail sales report. The government reported that retail-sales growth slowed somewhat in March, but not as much as expected. Retail sales rose 0.4% to $269.2 billion in March, held down by softer demand for cars. Sales excluding autos advanced a much stronger 1.4% to $202 billion. Economists surveyed by Thomson Global Markets expected sales to increase only 0.2% in March and sales excluding autos to rise only 0.4%.
J.P. Morgan's Mr. Wolfe said the retail-sales report was somewhat disconcerting, since consumption remains relatively strong despite the sell-off in technology issues. He said the market will be keeping a close eye on consumer price data, which is expected Friday along with March industrial production figures.
In major market action:
Stocks were weak. On the Big Board, where 845 million shares traded, 1,621 stocks declined and 1,263 advanced. On the Nasdaq Stock Market, volume reached 1.57 billion shares.
Bonds declined. The 30-year Treasury bond was down more than 1/8 point, or $1.25 for a $1,000 bond. Its yield, which moves inversely to price, rose to 5.80%. The 10-year bond fell more than 1/8 point, while its yield rose to 5.93%.
The dollar edged higher. It traded at 95.43 cents to the euro and 105.78 yen to the dollar, compared with 95.81 cents to the euro and 105.75 yen to the dollar late Wednesday in New York.>>
**IMO, this tech sector has the potential to rebound MUCH quicker than some of these 'experts' from the Wall Street Houses think it will...;-)
Best Regards,
Scott |
