Big techs take a beating, then recover
The Dow and the Nasdaq plunge by more than 200 points before bouncing back to post modest declines as investors remain concerned about rising interest rates.
At the close of regular trading, the Nasdaq composite index was off 26.19 to 3,364.21 and the Standard & Poor's 500 was down 6.23 to 1,400.72.
At one point during the day, the Nasdaq sagged to 3,172--well below the previous low for the year that was set during the massive sell-off of April 14. Overall, 256 stocks set new lows on the Nasdaq today.
The Dow Jones industrial average fell 84.30 to close at 10,542.55, led by General Motors.
"There's a lack of buying on the part of some institutional investors who think the Fed will increase interest rates" to fight inflation, said Bill Meehan, chief market analyst at Cantor Fitzgerald.
Adding to the anxiety, the Federal Reserve Bank of Philadelphia released a survey of economic forecasters today who predicted rising inflation during the next two years.
"There's probably not been much urgency for anybody to buy anything," agreed Philip Dow a market strategist at Dain Rauscher Wessels.
Large technology stocks bore the brunt of today's selling, but the late rally masked some of the steep declines. "After the sell-off (last April 14) these stocks were seen as safe," said Meehan. However, as today's trading showed, "within the technology sector, there's no place to hide."
"Blue chip names are really the last shoe to drop," said investment strategist Brian Rauscher of Morgan Stanley. "We still have to clean out some of the (high) valuations."
Intel, for example, fell as low as $111.38 but recovered to close at $118.38, up 50 cents. Microsoft dipped to a 52-week intra-day trading low $62.44, but closed at $64.19, down 88 cents. The company released a security patch that it hopes will prevent hackers from targeting Windows computers with the type of attacks that swamped such popular sites as Yahoo and eBay earlier this year.
The CNET tech index lost 10.47 to close at 2,517.90, as 67 of the 99 stocks in the index fell, 31 gained and one remained unchanged.
Of the 18 sectors tracked, server hardware companies posted the biggest gains, rising 3 percent. Software makers were the day's biggest losers, falling 2 percent.
Online trading firms led the decline among members of the CNET Tech Index.
Ameritrade fell $1.19, or nearly 9 percent, to $12.56; E*trade fell $2.88, or about 15 percent, to $16.50; Knight Trading fell 62 cents to $28.88. Credit Suisse First Boston predicted that the sector would see a decline in transactions in May that reflects the overall decline in volume in the stock markets. Shares of TD Waterhouse Group also fell 75 cents to $16.81.
After falling as low as $113.25, Yahoo gained $5.94 to close at $126.25. The Web portal launched a program that allows individual investors to buy shares directly from the company as a way of attracting more individual shareholders.
Shares of Cisco Systems also finished higher after dropping early. The shares closed up $1.81 at $55.25 after falling to $50. eBay rose $18, or 15 percent, to $136.19 after falling as low as $109.50.
The Philadelphia semiconductor index fell 7.58 to 942.66, led by chipmaker Advanced Micro Devices, which lost $3.43 to close at $80.35.
Compaq Computer announced that IBM will produce the chips for the company's business computers. Shares of Compaq closed down 69 cents at $26.75, while IBM rose $2.81 to $109.25.
Some industry analysts think the markets will languish in light trading until the next Federal Reserve meeting in late June. "The best case for the bulls is a (Nasdaq) trading range between 3,300 and 3,700 over the next five weeks," said Pip Coburn, senior technology strategist at Warburg Dillon Read.
Rauscher of Morgan Stanley also sees rocky times ahead. "You have interest-rate concerns and a shift in sentiment towards the technology sector," he said.
"There's a general feeling of negativity that were in," said Coburn. "There's no one factor, it all kind of adds up."