Technology stocks faded for a third straight session Tuesday, reflecting disappointing quarterly reports by former tech darlings Compaq Computer and JDS Uniphase and a general reversal of the mid-April rally.
The broad stock market closed narrowly mixed, although the benchmark Standard & Poor’s 500 index fell back into bear market territory, defined as a 20 percent slide from its peak last year.
The Dow Jones industrial average fell 77.89 points, to 10,454.34, on moderate New York Stock Exchange trading volume of 1.21 billion shares. Winning issues slightly outnumbered losers among NYSE stocks.
A widely forecast decline in the Conference Board’s index of consumer confidence for April added to the bad news depressing stock prices Tuesday.
The Standard & Poor’s 500 index fell 14.89, or 1.4 percent, to 1209.47. Compaq Computer lost $3.15, or 15 percent, to $17.50.
Among blue chips, Walt Disney posted quarterly profits in line with Wall Street forecasts. The company said it might exploit the current economic sluggishness and weak ad revenues to make acquisitions.
The Nasdaq composite index lost 42.71, or 2.1 percent, to 2016.61, on moderate Nasdaq trading volume of 1.98 billion shares.
Losers held a narrow lead over winners among Nasdaq stocks. JDS Uniphase dropped $3.36, or 14 percent, to $20.82.
Reports of the market’s late April slippage have concentrated on technology growth stocks. But declines of the last few days have hit so-called value stocks, with lower prices relative to earnings, as well as growth stocks, with higher prices relative to recent earnings.
The Nasdaq index has surrendered nearly half its April gain, but not all the tech news was glum Tuesday.
International Business Machines boosted its quarterly dividend to 14 cents a share, from 13 cents, payable June 9 to shareholders of record May 10. IBM also announced plans to repurchase up to $3.5 billion of its $198 billion worth of stock.
Shares of online merchant Amazon.com advanced in late trading. After the close of the regular Nasdaq session, the company posted a smaller-than-expected loss and reiterated its expectation of achieving a profit from operations by the end of the year.
Elsewhere, Internet service provider EarthLink said its first-quarter loss was less than Wall Street expected. Company officials expressed optimism about their ability to reduce costs and boost revenues.
The Russell 2000 index of small-company stocks added 1.28, to 462.35.
Treasury securities closed lower.
International markets registered an indifferent reaction to the election of Junichiro Koizumi as the new head of Japan’s ruling political party and the presumed new Japanese prime minister.
Business conditions and sentiment in Japan deteriorated in the first quarter, circumstances that the selection of a prime minister cannot reverse quickly.
Meanwhile, the dollar gained against the euro, despite concerns last week that the inflationary implications of the latest Federal Reserve interest rate cut would shift capital to Europe. Recent reports indicate Europe has its own inflation problems.
One if by land: George Cloos, a retired economist from the Federal Reserve Bank of Chicago, sends a historical insight:
April 18, the day Fed Chairman Alan Greenspan engineered a surprise cut in short-term interest rates, was the 226th anniversary of Paul Revere’s ride, although Revere waited until after markets were closed for the day.
Some analysts say Greenspan, like Revere, was warning of impending problems, not issuing a “buy” signal. Cloos, noting the Fed’s statement that accompanied the rate cut, agrees.
“The Fed has unparalleled resources of [economic] measurement and analysis,” he said. “Logically, the cut in the fed funds rate and the pessimistic statement should have given stockholders cause for alarm.”
Moreover, Cloos has a longstanding complaint against the notion that Federal Reserve policy action “sets” interest rates. He argues that the Fed merely follows the interest rate trend.
“All classes of rates had been declining irregularly for seven months before the first cut in the fed funds rate was announced Jan. 3,” he said.
Maybe so, but short-term rates had been heading higher in the days just before last Wednesday’s Fed surprise.
