Investors get sour over tech stocks
NEW YORK » Wall Street waffled but showed some signs of stability yesterday, posting a moderate decline after falling sharply early in the session in response to sinking commodities prices. The Nasdaq composite index was hit hard as technology stocks fell out of favor with risk-averse investors, but it also finished above its lows for the day.
After dropping along with markets in other countries, U.S. stocks managed a modest comeback including a brief foray into positive territory by the Dow Jones industrials shortly before the close. But with the outlook for inflation and interest rates still unclear, traders were nervous about buying stocks affected by the sliding price of gold and other metals, as well as riskier investments such as tech issues. And so it wasn't certain whether stocks could continue to steady themselves when trading resumed today.
The retreat in commodities overshadowed a rebound in bonds and a recovering U.S. dollar. "This is essentially a classic tug of war between real assets and financial assets," said Jack Ablin, chief investment officer of Harris Private Bank.
Stocks built on losses that began May 10 amid fears that inflation will bring higher interest rates; the decline has sent the Dow tumbling more than 4 percent since then. While the market has been hoping for lower oil and gold prices to help ease inflation, analysts say overly optimistic investors had bid stocks higher earlier this spring and now aren't ready to start buying again.
"What needs to happen is investors need to start discerning what's risky and what's not," Ablin said. "Right now, they're just busy selling without any regard for quality."
The Dow fell 18.73, or 0.17 percent, to 11,125.33, after tumbling as much as 103 points earlier. The Dow briefly turned higher late in the day as investors bought up large-cap stocks, which have lagged the broader market so far this year.
Broader stock indicators also recouped some earlier losses. The Standard & Poor's 500 index lost 4.96, or 0.39 percent, to 1,262.07; the Nasdaq dropped 21.02, or 0.96 percent, to 2,172.86, a sign of Wall Street's diminishing faith in the volatile tech sector.
Crude futures bounced back after hitting a six-week low at midday, although traders were still worried that persistent high prices were eroding demand. A barrel of light crude gained 70 cents to settle at $69.23 on the New York Mercantile Exchange.
The drop in commodities prices and fear of rising interest rates left stocks in emerging markets down for the 10th straight session, led by a steep pullback on India's exchanges.