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Early Rally Fizzles as Late-Session Sell-Off Wounds Dow, Nasdaq

Wall St.: The market's failure to follow through on Wednesday's rebound troubled analysts, who worry that more investors will give up on the market.

May 26, 2000|From Times Staff and Wire Reports

The latest rally attempt on Wall Street failed Thursday, as a sell-off in the final two hours of trading dragged major indexes lower.

The Nasdaq composite, which rose as much as 2.9% early in the day, building on Wednesday's 3.4% gain, ended down 65.26 points, or 2%, at 3,205.35.

The Dow Jones industrial average slumped 211.43 points, also 2%, to 10,323.92.

Microsoft weighed on Nasdaq and the Dow, tumbling $4.06 to $61.50 on renewed worries about the outcome of its antitrust battle with the government.

But the late selling dragged a host of other big-name tech stocks lower as well, after sharp gains Wednesday and early Thursday.

Losers outnumbered winners by 23 to 17 on Nasdaq and by 4 to 3 on the New York Stock Exchange. Volume slowed from Wednesday's pace, with 1.57 billion shares changing hands on Nasdaq.

The market's failure to follow through on Wednesday's rebound--which had been Nasdaq's first gain in six sessions--troubled analysts, who worry more investors will give up on the market.

Many stocks have simply churned in a narrow range for the last month. Tech stocks, however, have generally continued to tumble, as brief rallies have given way to fresh declines. The Nasdaq composite index now is down 36.5% from its record high set March 10.

"We have to follow through [on rallies]," said Barry Hyman, senior analyst at Ehrenkrantz King Nussbaum in New York. "If we don't, a single up day is meaningless."

While stocks fell again, the Treasury bond market rallied. Yields fell across the board, with the 10-year T-note ending at 6.40%, down from 6.47% on Wednesday.

Analysts said the bond market benefited as the Treasury bought back another $2 billion of securities, and as bonds rallied in Europe after the central bank there left its key interest rate unchanged.

Among Thursday's highlights:

* Tech stocks closing lower after early rallies included Cisco Systems, down 63 cents to $54.50; IBM, down $3.13 to $106.50; Sun Microsystems, down $3.50 to $72.88; Qualcomm, down $7.75 to $69; and Intel, down $2.19 to $115.19.

But Oracle gained $2.19 to $66.44, Micron Technology rose $4.31 to $64.63, Ciena jumped $6.81 to $104.50 and Tibco Software rose $2.81 to $54.63.

* Major brokerage stocks plunged after a Merrill Lynch analyst said Goldman Sachs is likely to miss second-quarter earnings estimates of $1.47 a share, as trading volume shrinks and new stock offerings are canceled.

Goldman tumbled $7 to $73, Morgan Stanley Dean Witter slid $4.25 to $64 and Lehman Bros. fell $5.19 to $72.50. The report also hurt Merrill itself, which fell $5.81 to $94.31.

"This shouldn't come as a surprise, especially in light of the anemic volume we've been seeing," said Arthur Hogan, chief market analyst at Jefferies & Co. "But it's always someone's turn to go to the woodshed, and the financials are the sector du jour."

* Some investors turned back to "defensive" stocks such as drug issues. Warner-Lambert gained $2.56 to $124.25, Lilly rose $1.50 to $78.63 and Pharmacia inched up 31 cents to $52.13.

Genentech surged $7.75 to $100, but most biotech shares fell. The Amex biotech index slid 1.9%.

* Energy stocks fell even though crude oil futures rose again, adding 58 cents to $30.51, and gasoline futures closed near a nine-year high on tight supplies. Exxon Mobil lost $1.50 to $81.44 and Chevron dropped $1.06 to $93.19.

Market Roundup, C7-8

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