Stocks head downward over rate uncertainty
NEW YORK » Wall Street retreated yesterday, falling amid vanishing hopes for an interest rate cut and an unimpressive forecast from Apple Inc. that muted investors' enthusiasm for technology stocks.
Government data released yesterday indicated slowly rising prices for consumers, as well as a surprising plunge in jobless claims to an 11-month low and a ramp-up in housing construction. The reports pointed to an economy that's more resilient than the market had thought, leading more investors to lower their expectations for a rate cut. A cut could boost consumer spending by making debt less cumbersome and help companies pull in higher profits.
"People have been focusing so much on the weak housing market, but it doesn't look like it's spilling at all into the rest of the economy. This expansion is going to go on," said Brian Gendreau, investment strategist for ING Investment Management. "The market has been pricing in a rate cut. It's still in there, but with a lot less conviction than before."
Meanwhile, Apple issued a forecast for the current quarter that was strong, but not as strong as investors anticipated. The report, which overshadowed record profits from brokerage Merrill Lynch & Co., compelled investors to scale back their high expectations for computer and electronics sales this year.
Crude oil's drop to $50 a barrel yesterday also made investors shudder. Though low energy prices help consumers, the plunge could mean big losses for companies that have money in commodities as part of their investment strategy.
The technology-laden Nasdaq composite index declined 36.21, or 1.46 percent, to 2,443.21 -- its biggest one-day drop since Nov. 27, when it fell by 2.21 percent. The Nasdaq is still up more than 1 percent on the year, however.
Dow Jones industrial average slipped 9.22, or 0.07 percent, to 12,567.93. The Standard & Poor's 500 index fell 4.25, or 0.30 percent, at 1,426.37. The Russell 2000 index of smaller companies was down 10.56, or 1.34 percent, at 778.21.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where consolidated volume came to 2.89 billion shares, up from 2.72 billion shares at the same point Wednesday.
Bonds fell slightly, with the yield on the benchmark 10-year Treasury note at 4.77 percent, down from 4.78 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices edged lower.
Crude sank $1.76 to settle at $50.48 a barrel on the New York Mercantile Exchange. It briefly fell below $50 to its lowest price in 20 months after the U.S. Department of Energy reported that the nation's crude oil and gasoline inventories grew.