Posted at 11:19 a.m., Friday, May 16, 2003
Stocks slip, but post another winning week
By Hope Yen
Analysts said two downbeat government reports stirred some concerns of a tepid economic recovery, while a disappointing outlook from Dell weighed on tech shares. Still, investor optimism remained high, helping to limit today's losses.
"We've had a great run since the end of the war and I'm astounded how the market has held these gains," said Steve Kolano, an equity trader at The Boston Co. Asset Management.
"Investors are ready to turn the corner," he added. "But I am getting a little concerned that this rally is a bit overdone. We haven't seen hard evidence yet the economy is ready to turn."
The Nasdaq closed down 12.85, or 0.8 percent, to 1,538.53. The S&P declined 2.37, or 0.3 percent, to 944.30.
Blue chips also finished lower. The Dow fell 34.17, or 0.4 percent, at 8,678.97, having gained 65 points the previous session.
For the week, all three main gauges finished higher, with the Dow up 0.9 percent, the Nasdaq higher 1.2 percent and the S&P 500 up 1.2 percent. It was the fifth winning week for the S&P 500, its best performance since August 2002. The Dow posted a third week of gains, a feat not seen since November 2002.
Dell today fell 99 cents to $31.19 after the computer maker reported quarterly profits that met analysts' expectations but it also said it does not expect a major turnaround in the tech market and a Smith Barney analyst downgraded the stock, citing overvaluation.
"Dell's numbers didn't blow anything out of the water," said Russ Koesterich, U.S. equity strategist at State Street Corp. "The growth isn't really coming from significant revenue growth, but from cost-cutting. For the market to go really higher, we need to see that companies like Dell can grow the top line."
Two economic reports also prompted some selling.
The Labor Department reported consumer prices fell by 0.3 percent in April, the biggest decline in 18 months. The reading suggests inflation isn't a concern, although deflation might be. And the Commerce Department said the number of new housing projects started in April dropped by 6.8 percent, indicating the once-hot sector is losing momentum.
Stocks have enjoyed gains in recent weeks after upbeat first-quarter earnings and the end of the war with Iraq bolstered hopes of a rebounding economy. While investors remain optimistic, analysts say the market remains vulnerable to bursts of profit-taking.
"The big question you have to ask is what is the next catalyst," Koesterich said. "It's the end of the earnings season and most of the economic numbers are done for the rest of the month.
"Short of technical reasons, there aren't a lot of catalysts," he added. "We're likely to churn at these levels and try to digest these gains."
General Motors lost 47 cents to $34.41 after Prudential Financial cut the stock rating to "sell" from "hold," citing the company's declining market share.
AT&T rose 68 cents to $18.12.
Declining issues narrowly outnumbered advancers on the New York Stock Exchange. Volume was moderate.