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Wall St falls on tech outlook worries

Wall St falls on tech outlook worries
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First Published: Fri, Jul 30 2010. 08 33 AM IST
Updated: Fri, Jul 30 2010. 08 33 AM IST
New York: US stocks sagged in volatile trading on Thursday after weak outlooks from technology companies and downbeat comments from a Federal Reserve official gave investors little reason to buy.
The market has struggled to make headway this week. The S&P 500 fell for a third straight day and has run into resistance around its 200-day moving average as investors searched for a catalyst to take stocks higher.
Friday’s Commerce Department report on second-quarter gross domestic product will be another marker for the strength of the recovery, which appears to be losing steam after several weak economic reports.
Investors took advantage of early declines on Thursday to bargain hunt, particularly in the technology sector, which had fallen over 1% after tech firms Nvidia Corp and Symantec Corp gave weak outlooks.
The PHLX Semiconductor Index bounced off a session low near its 200-day moving average, watched by investors to determine market movement. The index was still down 1.9% but was up 6% for July.
“Any time you have a pullback like today, it’s going to look like a very good entry point,” said Craig Ellis, managing director of Caris & Company in San Francisco. “Investors have shown a lot of interest in adding to well-positioned, big-named stocks, but were looking for a good entry point.”
The Dow Jones industrial average dropped 30.72 points, or 0.29%, to 10,467.16. The Standard & Poor’s 500 Index dropped 4.59 points, or 0.41%, to 1,101.54. The Nasdaq Composite Index dropped 12.87 points, or 0.57%, to 2,251.69.
On the economy, St. Louis Federal Reserve Bank President James Bullard said he is worried about the risks the United States could fall into a Japan-style quagmire of falling prices and investment. That pressured stocks before a late session rebound.
“Any time you make the comparison that the US might look like Japan that has to be considered a negative,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.
Friday’s GDP number is widely expected to show US economic growth slowed in the second quarter as some investors fret about the possibility of a double-dip recession.
Michael James, senior trader at Wedbush Morgan in Los Angeles said the market still remains in an uptrend with strong support around 1,100 on the S&P 500. “The bulls are still in control of the market right now,” he said.
Nvidia and Symantec cut expectations for the next quarter, raising questions about demand for technology components and contributing to concerns that the economic growth is slowing.
Nvidia fell 9.9% to $9.13, and Symantec dropped 11.2% to $13.03.
The PHLX semiconductor index fell as much as 2.8% on Thursday, its largest%age decline in nearly two weeks, taking the index near its 200-day moving average. The 200-day average, now near 348, served as resistance on 20 July.
“We’ve had a SOXX that’s been trapped in the trading range between 330 and 370, and just a few days ago we were toward the higher end of that range,” Ellis said. “We finally got some bad news so we’ve sold off back toward the middle of that range.”
The index hit a five-week closing high just below 370 on Monday.
Exxon Mobil Corp, the S&P’s largest company by market capitalization, fell 0.9% to $60.34 after reporting a better-than-expected quarterly profit.
Consumer staples also fell, with the S&P consumer staple index down 1.1% after Kellogg Co lowered its outlook and Colgate-Palmolive posted weaker-than-expected sales.
Kellogg’s shares fell 6.9% to $47.98 while Colgate-Palmolive dropped 6.8% to $78.12.
Through Thursday morning, 60% of companies in the S&P 500 have reported quarterly earnings, with 75% of companies beating expectations and 35.1% year-over-year earnings growth.
But companies’ forecasts for the third and fourth quarters have frequently missed Wall Street’s expectations.
About 8.45 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, short of last year’s estimated daily average of 9.65 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 9 to 8, while on the Nasdaq, about nine stocks fell for every eight that rose.
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First Published: Fri, Jul 30 2010. 08 33 AM IST
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