Hesitant Investors Push Stock Prices Down
NEW YORK – Investors pushed share prices down in hesitant trading Monday as worries about interest rates overwhelmed positive economic and earnings news. Tech stocks were dragged down by weakness in semiconductor shares.
After fluctuating in and out of positive territory, the major indexes were down in midafternoon trading. The Dow Jones industrial average declined 22.86, or 0.2 percent, to 10,449.98.
Among broader stock indicators, the Standard & Poor’s 500 index was down 4.45, or 0.4 percent, at 1,136.15, while the Nasdaq composite index was down 12.80, or 0.6 percent, at 2,036.97.
Volume was light as investors had little news to guide them. A report from the Commerce Department that new home sales jumped by 8.9 percent in March, the largest monthly increase in nine months, did little to influence the market.
During the past two weeks, investors have been largely preoccupied with interest rates after strong economic data and comments by Federal Reserve Chairman Alan Greenspan made it clear that rates are likely to rise sooner rather than later. The reality of an impending rate hike has generally overshadowed positive economic news and the very strong earnings reports many companies have issued.
Sung Won Sohn, chief economist at Wells Fargo & Co., said the fluctuation in the market reflected the seesaw of investor emotions: “One day, we’re impressed by earnings and shares rise. Without that, the fear of high interest rates takes over and the market goes down.”
He doesn’t expect the Fed to move on interest rates before August.
Sohn also said there was little to propel trading upward because “to many, the stock market seems either fairly valued or overvalued, so there’s not much more value to be squeezed out.”
Scott Wren, senior equity strategist for A.G. Edwards & Sons, said the market is at the point where good economic news does not translate into higher stock prices, since a strengthening economy raises the chance of a large rate hike.
“This choppy market action which we’ve been seeing for a while is really typical for this point in the cycle,” he said.
Michael Sheldon, chief market strategist at Spencer Clarke LLC, said that 80 percent of the S&P 500 companies will have reported first-quarter by the end of this week. So far, the earnings are around 23 percent to 26 percent higher than last year, far above expectations at the beginning of the year.
But the question remains in the minds of investors: “Are strong earnings enough to keep the market moving higher, despite rising interest rates?” Sheldon said.
General Motors Corp. and Ford Motor Corp. rose after a Lehman Brothers analyst upgraded both companies on the strength of their finance businesses. GM, a Dow component, was up 67 cents at $49.85, and Ford was up 9 cents at $15.79.
Biotech stocks rose after Swiss drug maker Roche Holding AG said a new drug was effective against some forms of lung cancer. U.S. biotech giant Genentech Inc., which licenses the drug, was up $14.58, or more than 12 percent, at $132.80. Its marketing partner, OSI Pharmaceuticals Inc., rose $55.88, or 146 percent, to $94.02.
Dallas-based energy company TXU Corp. was up $3.94 at $33.57 after it said it would sell various businesses, including its Texas gas utility, for more than $4 billion.
The Nasdaq was dragged down in part by weakness in companies manufacturing and marketing semiconductors. Intel Corp. was down 55 cents at $26.98, while Applied Materials was off 71 cents at $19.27 and National Semiconductor was down $2.35 at $43.86.
Microsoft Corp. dropped 34 cents to $27.20.
Declining issues outnumbered advancers by 4-to-3 on the New York Stock Exchange, where volume was 965 million, below the 1.07 billion traded at the same point Friday.
The Russell 2000 index of smaller companies was down 0.26, or 0.04 percent, at 590.45.
Overseas, Japan’s Nikkei stock average rose 0.4 percent. Britain’s FTSE 100 was up 0.04 percent, Germany’s DAX index was up 0.5 percent, and France’s CAC-40 was down 0.7 percent.
—
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com