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Industrial shares slump as technology rallies

The Dow and Nasdaq go separate ways as economic data diverge. Mattel and Macy's fall after negative news.

February 03, 2009|Times Wire Services

The major stock indexes finished mixed Monday as industrials slumped on disappointing earnings and weak economic data while technology names rallied.

Share prices fell in the early going after the Commerce Department said personal spending fell 1% in December, marking the sixth straight monthly decline. Analysts had predicted a decline of 0.9%.

Even though personal income also dipped, Americans' average savings rate shot higher, indicating extreme nervousness about the economy.

The government also said construction spending fell 1.4% in December, slightly worse than the 1.2% economists expected.

Stock indexes rebounded from their lows after the Institute for Supply Management said its survey of manufacturing activity unexpectedly jumped in January from a record low. But the reading still reflected significant contraction in the sector.

"People are waiting for indications that things are getting better," said John Massey, senior vice president and portfolio manager at AIG SunAmerica Asset Management. "One better-than-expected report does not make a trend. People have to have more than a hunch that things are going to get better."

Department store operator Macy's spooked investors by saying it planned to cut 7,000 jobs, or about 4% of its workforce, and slash its dividend. Macy's shares dropped 4%.

Investors monitored the progress of the economic stimulus proposal in the Senate as well as reports that Treasury Secretary Timothy Geithner would outline a bank rescue plan next week.

The Dow Jones industrial average fell 64.03 points, or 0.8%, to 7,936.83. The Standard & Poor's 500 index edged down 0.44 point, or 0.1%, to 825.44. Both indexes had their worst January ever as the market gave back its gains from a late-2008 rally.

But the tech-dominated Nasdaq composite index rose 18.01 points, or 1.2%, on Monday to 1,494.43.

"Technology is one of the sectors that people, businesses are always going to need," said Keith Springer, president of Capital Financial Advisory Services. "There's a feeling that corporations are going to continue to invest in technology."

Intel surged 5.7%, while Microsoft jumped 4.3%.

Information technology shares in the S&P 500 gained 2% on average, while telecom stocks rose 1.5% as a group.

Shares of smaller companies also gained. The Russell 2,000 small-cap index rose 1.4%.

But declining issues outnumbered advancers more than 8 to 7 on the New York Stock Exchange.

Mattel sank 16% after reporting a 46% skid in fourth-quarter profit, much worse than analysts expected.

Humana slid 5.8% on the health insurer's 28% drop in profit, driven in part by higher claims in its stand-alone Medicare prescription drug plans.

Among industrial names, 3M fell 5.9%, while energy company ConocoPhillips lost 3.8%.

Financial stocks in the S&P 500 rose 0.2% on average. But Bank of America tumbled 8.8%.

The Treasury bond market was mixed. The yield on the benchmark 10-year Treasury note fell to 2.71% from 2.84% late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.27% from 0.23% late Friday. The dollar was mixed, while gold prices fell.

Oil futures fell $1.60 to settle at $40.08 a barrel on the New York Mercantile Exchange.

Overseas, key stock indexes slumped 1.7% in Britain, 1.6% in Germany and 1.5% in France.

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