A second straight day of selling on Wall Street sent the Nasdaq composite index below the 2000 mark Tuesday for the first time this year.
Treasury securities rallied for a third straight day, extending an unexpected slide in interest rates.
“I wonder if the market is telling us the economy is slowing down,” said Jack Tilton, Glen Ellyn-based market analyst with Channel Trend.
The Dow Jones industrial average fell 72.52 points, to 10,456.96. The decline was broad-based, with only six of the 30 Dow stocks posting gains.
The Nasdaq composite index lost 13.62, to 1995.16.
For months, analysts have been warning that the stock market would cool off from the rally that began a year ago, especially in the popular technology sector.
“We’ve been calling for a correction for a while. Investors finally are taking profits out of the areas that have been hot,” said Paul Nolte, technical market analyst with Hinsdale Associates in Hinsdale.
But last Friday’s surprisingly weak report on job growth in February raised the specter of a more fundamental shift in investor sentiment.
“We’re still getting some overhang from the employment report,” Nolte said.
The Labor Department reported that the economy generated just 21,000 jobs last month, far below the 130,000 jobs predicted by forecasters.
Tilton said another factor depressing stock market optimism is weakness in personal income. Recent business productivity gains have boosted corporate profits, but not compensation to workers, according to the latest data, he said.
“I come across sounding like an economic consultant to the Democratic Party, but those numbers are striking,” he said.
Typically, higher productivity boosts corporate profits and worker compensation alike. “My concern is that the non-existent growth in labor income could hurt [consumer] spending,” he said.
Still, the stock market has not sent up a distress signal.
“The market is fairly priced,” said Fane Lozman, chairman of market monitoring service Scanshift. “It’s nothing to panic about. We are having a blah year.”
Indeed, investors may have forgotten the wild markets of recent years. In March 2001, the Nasdaq composite index was also trading around 2000, but with greater volatility.
This year’s drop in the Nasdaq from its closing high on Jan. 26 to its low close on Tuesday was 159 points. But the index sank 245 points on just two consecutive trading days in March 2001, Lozman said.
“Back then, no one had an idea of what a fair price was,” he said. “This has been a very quiet year.”
Chicago-based money manager Carl Birkelbach said the pullback may be near an end.
“I think it’s a buying opportunity,” he said. “It’s giving me the first indication that it’s not going to go a lot lower.”
Tuesday’s action: The Standard & Poor’s 500 index dropped 6.63, to 1140.58. The Russell 2000 index of small-company stocks fell 6.56, or 1.1 percent, to 585.95.
Among stocks in the news, Procter & Gamble advanced sharply after the close of regular New York trading.
The company boosted its dividend for the second time in its current fiscal year and declared a 2-for-1 stock split.
The consumer products giant also issued an upbeat forecast for the current quarter and year.
As if to confirm reports of an investor shift from more speculative technology stocks to more stable consumer stocks, Texas Instruments closed down 34 cents, to $30.26, despite an upbeat forecast late Monday.
General Electric dropped 27 cents, to $31.56. The company issued 119 million shares, at $31.83, to pay for its purchase of entertainment assets from Vivendi Universal.
Oilfield services provider Halliburton fell 91 cents, to $30.70. The company said investigations of its business affairs in Iraq could squeeze its cash availability.
New York Stock Exchange trading volume reached 1.48 billion shares. Losing stocks outnumbered winners by a 5-3 ratio among NYSE-listed issues.
Nasdaq trading volume totaled 2.05 billion shares, as losers topped winners by a 2-1 ratio.
Treasury securities scored their third straight advance, with yields reaching fresh eight-month lows. The Treasury is set to sell $16 billion of 5-year notes on Wednesday and $11 billion of 10-year notes on Thursday.
