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Investors take profits
as Dow drops 127
NEW YORK >> Lacking major earnings or economic news to guide them, investors fell back on profit-taking yesterday, sending stocks sharply lower and knocking the Dow Jones industrials down more than 120 points.
Analysts expect the market to pull back or make little progress ahead of a decision tomorrow on interest rates. Investors anticipate that the Federal Reserve's Open Market Committee will once again cut rates to stimulate the economy, and analysts say that expectation has largely been factored into higher stock prices.
"The market has been extended. ... You have some people saying, 'I am not going to wait for the (Fed's) news to come out, I'm just going to book profits now,'" said Richard A. Dickson, senior market strategist, at Lowry's Research Reports in Palm Beach, Fla.
After tumbling as much as 162.46 points, the Dow ended yesterday's session down 127.80, or 1.4 percent, at 9,072.95. The decline followed last week's gain of 0.9 percent, the Dow's fourth consecutive winning week.
Entering the last week of the second quarter, the Dow is up 13.5 percent, putting the blue chips in position to achieve their best quarter since the fourth quarter of 1998, when they soared 17.1 percent.
The broader market also retreated yesterday. The Nasdaq composite index dropped 33.97, or 2.1 percent, to 1,610.75, having risen 1.1 percent last week.
The Standard & Poor's 500 index fell 14.05, or 1.4 percent, to 981.64, having climbed 0.7 percent last week for its fourth straight weekly gain.
Declining issues outnumbered advancers slightly more than 3 to 1 on the New York Stock Exchange. Consolidated volume was light at 1.75 billion shares, below Friday's 2.24 billion.
The Russell 2000 index, the barometer of smaller company stocks, fell 10.15, or 2.3 percent, to 439.41. The NYSE composite index dropped 82.32 to 5,549.09. The American Stock Exchange composite index slipped 7.22 to 960.71.
"What we have seen is a broadening out of (investors') appetite for equities, but only to a certain price. ... Now we see investors being more discriminating, said Joseph V. Battipaglia, chief investment officer at Ryan, Beck & Co. "That is what normally happens when you have such big moves higher."
Yesterday's losses were moderate compared with more than three months of strong rallies on Wall Street. Even with the session's sell-off, the tech-focused Nasdaq is 26.7 percent above where it stood on March 11, the low point from which the rallies ensued. The Dow has climbed 20.6 percent since March 11, while the S&P has gained 22.6 percent.
Among yesterday's losers, hospital chain Tenet Healthcare dropped $4.22, or 26 percent, to $12.01 after warning that second-quarter earnings will be significantly below analysts' forecast calling for 34 cents a share.
JetBlue fell 94 cents to $38.01 after Bear Stearns downgraded it to "peer perform" from "outperform." R.J. Reynolds Tobacco declined 64 cents to $36.36 after Morgan Stanley cut its rating to "underweight" from "equal-weight."
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