Star-Bulletin news services
Skittish investors
take profits and runWall Street uneasy about
potential hike in interest rates
NEW YORK >> A spate of profit taking sent stocks lower yesterday, cutting into the previous session's gains and dimming hopes that Wall Street would shake its current malaise. Investors, skittish about a stronger dollar and the specter of an interest rate hike, consolidated their gains from Monday's strong session.
With very little economic or corporate news to encourage buyers, and with stock prices already considered somewhat overvalued, there was no real impetus to continue the buying from Monday's session, analysts said, although the market's foundation remains sound.
"I don't think what we're seeing here is an interruption in the overall direction of the market," said Peter Cardillo, chief strategist at S.W. Bach & Co. "I just think today is just a little bit of profit taking."
The Dow Jones industrial average was down 86.66, or 0.8 percent, at 10,591.48, nearly erasing the 94.22 points the index gained Monday.
Broader stock indicators also finished lower. The Standard & Poor's 500 index was down 6.86, or 0.6 percent, at 1,149.10 after an 11-point gain Monday. The Nasdaq composite index fell 18.15, or 0.9 percent, to 2,039.65, subtracting from the 28-point rise of the previous day.
The price of the Treasury's 10-year note closed down1732 point, while its yield rose to 4.04 percent from 3.97 percent yesterday. Two-year Treasury notes were down18 point and their yield was unchanged at 1.65 percent.
Speaking at the Economic Club in New York, Federal Reserve Chairman Alan Greenspan said nothing to ease Wall Street's concerns, especially about interest rates. He focused his discussion on monetary exchange policy, and said broad intervention into currency markets to support the dollar was unsustainable.
"The markets may have been more sensitive to interest rates and the dollar than we may have thought," said Jeff Kleintop, chief investment strategist for PNC Financial Services Group. "We also have earnings growth past the peak here, oil prices staying stubbornly high and inflows into equity mutual funds really trailing off. That all contributes to what we're seeing here."
Wall Street has been particularly uneasy about the possibility of higher interest rates since the Fed earlier this year seemed to be backing away from assurances that it would keep rates steady.
With many investors waiting for the government's employment report on Friday, analysts were trying to determine if the market had any momentum that could carry it forward after Monday's rally. That advance was the first real sign of life in a market that has been listless for several weeks.
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