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Indexes Pull Back on Fears

Saudi Arabia bombings put investors on guard after a buying spree. But strength in the Internet sector helps staunch the market's losses.

May 14, 2003|From Times Staff and Wire Reports

Blue-chip stocks sagged Tuesday after deadly bombing attacks aimed at Westerners in Saudi Arabia put investors on guard, putting the brakes on the market after a powerful two-month buying spree.

Just a day earlier, the Standard & Poor's 500 index notched its highest close since August.

"We've had a very meaningful move to the upside, and that starts to raise some worries about valuation," said Hugh Johnson, chief investment officer at First Albany Corp., adding that "the terrorist attack in Saudi Arabia reminds us that the big issues are still with us."

A downgrade of several semiconductor companies by Merrill Lynch also put a damper on the mood.

But strength in the Internet sector helped staunch the market's losses as investors, fearful of missing out on a rally, snapped up shares in companies such as

The Nasdaq composite index dropped 1.72 points, or 0.1%, to 1,539.68. A day earlier, the tech-laden index recorded its highest close since June. The blue-chip Dow Jones industrial average lost 47.48 points, or 0.5%, to 8,679.25, while the S&P 500 slipped 2.81 points, or 0.3%, to 942.30.

The losses were limited, given the severity of the suicide bombings in Riyadh that killed seven Americans. Losers led winners by a slim margin on the New York Stock Exchange, while on Nasdaq, advancers beat decliners by 16 to 15. Trading was moderate.

The terrorist attacks boosted oil prices and aggravated investor worries of more attacks on Westerners. Crude prices also were supported by news that oil stockpiles in the world's industrialized nations had fallen.

Crude oil for June delivery jumped $1.15 to $28.50 a barrel in New York trading. Oil prices have risen 13% since late April.

Investors betting on a bright economy later in 2003 have driven the S&P 500 up 17% since mid-March. Market watchers acknowledge that sentiment has improved on Wall Street, but they caution that the rally may soon peter out.

The dollar, which fell to a four-year low against the euro Monday, strengthened against the European currency after Treasury Secretary John W. Snow called for a "sound" U.S. currency. The dollar slipped against the yen, however.

In other highlights:

*, up $1.25 to $32.95, and Yahoo, up $1.05 to $27.22, were bright spots. The Amex Internet index rose 1.1%.

* Chip shares took a hit after Merrill Lynch cut its ratings on stocks of several semiconductor firms, saying they do not think business conditions and valuation merit "buy" ratings. Intersil fell 63 cents to $20.39, Nvidia lost 39 cents to $20.38, Maxim Integrated Products dropped $1.24 to $39.37 and Semtech fell 25 cents to $17.52. All were cut to "neutral" from "buy."

* After the close, Applied Materials, the biggest maker of semiconductor manufacturing equipment, posted a quarterly loss as a result of a charge for layoffs and restructuring. Applied Materials fell to $15.15 in after-hours trading after closing at $15.56, down 16 cents, in the regular session.

* Energy-related shares advanced with oil prices. ConocoPhillips added 67 cents to $52.05, Transocean jumped $1.37 to $21.50, ChevronTexaco rose 40 cents to $68.65 and Halliburton climbed 67 cents to $23.90.

* Avanex ranked as the biggest percentage gainer on Nasdaq, soaring $1.74, or 146%, to $2.93. The Fremont, Calif.-based maker of components and subsystems for fiber-optic networks agreed to acquire the optical component businesses of both Alcatel and Corning.

* Wal-Mart Stores fell $1.21 to $55.49 and dragged on the Dow. The company posted a 14% rise in quarterly profit and stood by its full-year outlook, but said the second quarter would probably show little improvement over the just-ended first quarter.

Market Roundup, C6-7

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