Posted at 2:30 p.m., Monday, July 16, 2001
Tech stocks hit by profit-taking
Associated Press
NEW YORK — Technology stocks resumed their slide today as investors, staying cautious while they awaited this week's flood of earnings reports, collected profits from last week's rally.
The market had little reaction to upbeat second-quarter results from Citigroup and Bank of America and a Commerce Department report showing flattening business inventories. Analysts said Wall Street is waiting to see whether the company reports that begin in earnest tomorrow provide any evidence that the weak economy is stabilizing.
The technology-focused Nasdaq composite index closed down 55.67 at 2,029.12, a loss of 2.7 percent, according to preliminary calculations.
The Dow Jones industrial average fell 66.94 to 10,472.12, a 0.6 percent decline, while the Standard & Poor's 500 index was down 13.23, or 1.1 percent, at 1,202.45.
"You had a decent rally last week, but the earnings worries are still there and investors are nervous," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.
The market's losses deepened as the session wore on, despite second-quarter results from Citigroup and Bank of America that surpassed analysts' expectations. Citigroup rose 29 cents to $49.15, while Bank of America gained $1.13 to $61.38.
Those gains failed to offset losses across the broader market on weaker earnings reports or fears of disappointment to come.
Bank of New York dropped $6.40 to $43, a 13 percent decline, after failing to meet expectations. Oil service stocks also struggled on worries that exploration and production demands are decreasing. Halliburton fell $1.75 to $30.40, a 5 percent loss.
Selling was especially strong in technology, particularly semiconductors. Applied Materials fell $4.41 to $41.95, a 9 percent drop, amid renewed worries that a recovery for the chip industry might not come until mid-2002.
Tech bellwethers were weak, too, including Hewlett-Packard, which fell $1.58, or more than 5 percent, to $26.40.
Analysts said investors were taking advantage of the gains from last week's big rally to unload tech stocks they feared would falter in coming months as the economy struggles to heal.
"Fundamentally things have not changed, and as a group technology stocks still appear to be relatively expensive," said Matt Brown, head of equity management at Wilmington Trust, who isn't convinced the worst is over.
The Nasdaq is about 17 percent below where it started 2001. The Dow is down about 3 percent, while the S&P is off 9 percent.
Today's losses halted a two-session advance that began last week as second-quarter earnings reports began to trickle in. Investors' relief that results were not worse than already reduced expectations set off the rally.
But analysts were more guarded, attributing last week's gains to a natural rebound after the strong selling in previous weeks as hundreds of companies reduced their quarterly forecasts, and in most cases said they were unsure when business would improve. The market-watchers say investors are still hesitant about big or long-term commitments amid such foggy prospects.
One of the indicators being watched closely is the level of excess inventory held by businesses. But investors were little moved by a report today from the Commerce Department that showed inventories of unsold goods flat in May as sales registered the biggest increase in more than a year.
The data is a sign that businesses finally are beginning to deflate excess inventory, something economists say must occur for growth to occur again.
Declining issues led advancers 3 to 2 on the New York Stock Exchange. Volume was light, at 1.03 billion shares, compared with 1.10 billion shares Friday.
