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Investors defensive,
Dow drops by 160
NEW YORK >> Stocks tumbled yesterday for the third straight session as investors, increasingly adopting a defensive strategy, bailed out of technology and other higher-risk shares. The Dow Jones industrial average shed 160 points and other major indexes also dropped sharply.
Investors have been anticipating a temporary market pullback following a nearly yearlong rally, but their recent eagerness to collect profits ahead of a significant decline may have helped fuel the correction.
"This is the third day in a row of some pretty heavy-duty rotation out of the cyclical stuff into the defensive stuff," said Scott Wren, equity strategist for A.G. Edwards & Sons. "It's like a steamroller effect, with a little selling early on, then more and more as anticipation of a correction set in and people decided to lock in some of these profits."
The Dow plunged 160.07, or 1.5 percent, to 10,296.89, its lowest close since Dec. 19. Since Friday, the Dow has dropped 298.66, or 2.8 percent, swinging to a loss for all of 2004 for the first time.
The broader gauges also fell considerably. On the fourth anniversary of the Nasdaq composite's all-time high of 5,048.62, the tech-heavy index sank 31.01, or 1.6 percent, to 1,964.15. That's a loss of 83.48, or 4.1 percent, so far this week, and its lowest close since Dec. 22.
The Standard & Poor's 500 index lost 16.69, or 1.5 percent, to 1,123.89, its lowest finish since Jan. 13.
The price of the Treasury's 10-year note closed unchanged and its yield held at 3.72 percent. Two-year Treasury notes were down 1/32 point and yielded 1.50 percent, up from 1.49 percent yesterday.
While most economists believe the recovery is on track, investors have found few bargains on Wall Street lately. Lackluster gains in the labor market and concerns over when the Federal Reserve will move to raise interest rates also have contributed to the market's malaise.
Many traders were looking ahead to today, when the government was to release its weekly report on unemployment claims, and Federal Reserve Chairman Alan Greenspan was to testify before the House Committee on Education and the Workforce.
"The market has definitely hit a point where it's weighing valuations against the changing tide of monetary policy," said Kevin Caron, market strategist with Ryan, Beck & Co. "We're also looking at recent economic data that has been mixed and disappointing to some ... and that's why the market is stalling here."
The major indexes reached their 2004 peaks three weeks ago, and have steadily declined since then. With no catalyst in sight to push stocks higher and forecasts for first-quarter earnings still ahead, investors may be scaling back their expectations.
With many investors wondering what's next for the markets, emotions are running high, magnifying disappointments and muting good news.
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