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Nasdaq Falls as Tech Stock Retreat Continues

Dow eases 0.44 point as blue chips largely hold ground. Long-term bond yields decline.

January 23, 2004|From Times Staff and Wire Reports

Technology stocks continued to slide Thursday while blue chips largely held their ground.

Long-term Treasury bond yields hit three-month lows despite upbeat economic reports.

On Wall Street, the tech-dominated Nasdaq composite index dropped 23.44 points, or 1.1%, to 2,119.01, as some investors pulled away from what has been the hottest market sector over the last 10 months.

By contrast, the Dow Jones industrial average eased 0.44 point to 10,623.18, and the Standard & Poor's 500 index fell 3.68 points, or 0.3%, to 1,143.94.

"Investors are moving from tech and some Nasdaq issues that look like they may have gotten ahead of themselves in the short run, and into larger-cap financial and cyclical names," said Robert Mikkelsen, a managing director at brokerage Advest Group.

"But it seems like an orderly rotation rather than a big overall correction, which is healthier and shows the strength of this market," he said.

Falling stocks outnumbered winners by more than 3 to 2 on Nasdaq, while winners had a slight edge on the New York Stock Exchange.

Many technology companies have reported strong fourth-quarter earnings, but some analysts have questioned the outlook for this year -- and whether the stocks' prices already reflect the best-case earnings scenario.

The Nasdaq index is up 5.8% this year after soaring 50% in 2003. The Dow is up 1.6% this year after rising 25% last year.

Tech shares losing ground Thursday included National Semiconductor, down $1.73 to $37.95; Tellabs, off $1.07 to $9.44; Adobe Systems, down $1.33 to $37.20; Siebel Systems, down $1.31 to $14.14; and Intel, off 57 cents to $31.63.

But there also were winners in the sector. FileNet jumped $2.53 to $29.90, EBay gained $4.94 to $69.32 and Xilinx rose $1.20 to $41.59. Investors were reacting to the three firms' quarterly earnings reports.

Blue chips were supported by Eastman Kodak, which rallied $3.49 to $30.95 on news of a major restructuring.

Other big-name stocks moving higher included Fannie Mae, up $3.68 to $79.35 on its earnings report; health maintenance organization WellPoint Health Networks, up $2.74 to a record $103.23; and AMR, parent of American Airlines, up $2.30 to $16.85 after posting a smaller quarterly loss.

In economic news, a surprise dip in new weekly claims for U.S. jobless benefits and a gain in the Conference Board's index of leading economic indicators pointed to stronger job growth in coming months, analysts said.

But the Treasury bond market rallied despite the positive economic data. The yield on the 10-year Treasury note fell to a three-month low of 3.95% from 4.02% on Wednesday.

Analysts said the Treasury market is benefiting in part from technical trading related to mortgage securities, and from expectations that the Federal Reserve, which meets next week, will reiterate that it has no plans to tighten credit soon.

Treasuries extended their gains Thursday after government officials denied market rumors that Al Qaeda leader Osama bin Laden had been caught. Bin Laden's capture probably would lead to a sharp rally in the stock market at bonds' expense, many analysts say.

Falling U.S. bond yields helped to undercut the dollar. The euro jumped to $1.271 from $1.263 on Wednesday and is nearing the record high of $1.28 reached Jan. 9. The dollar also slid to 106.08 yen from 106.91.

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