Nasdaq Extends its Record Streak
Blue-chip stocks fell in a second straight session of profit-taking Tuesday while the Nasdaq moved further into uncharted territory on investors' continued appetite for technology shares.
The Dow Jones industrial average fell 118.36 points, or 1.05 percent, to 11,106.65 after losing 61 points on Monday. The Standard & Poor 500 retreated 14.17 points, or 1.00 percent, to 1,409.17.
Arnie Owen, managing director of capital markets at Cruttenden Roth in Newport Beach, California, called the drop "normal, healthy profit-taking."
"I don't see any panic, you're looking at a good-growth, low-inflation environment," he said. "Nothing has changed."
The technology-laced Nasdaq composite index, which is on track to post its best year ever with a gain of 62 percent, shot up 40.70 points, or 1.15 percent, to 3,586.71.
Barry Hyman, market strategist for Ehrehkrantz, King Nussbaum, said the pullback was part of a needed correction.
"The Nasdaq can certainly pull back 5 percent without blinking an eye," he said.
The blue chips gave up ground despite good news about the economy.
The Labor Department said US workers' productivity rose in the third quarter at the fastest pace in almost seven years as labor costs dipped.
Productivity, as measured by the output per hour of workers outside the farm sector, rose at an annual rate of 4.9 percent between July and September. That was revised up from Labor's initial 4.2 percent estimate for the third quarter, and up from the 0.6 percent recorded in the second quarter.
The productivity gains were the fastest since a 7.4 percent annual rate in the fourth quarter of 1992, and matched the expectations of economists polled by Reuters.
"This data continues to underscore that, so far, the US economy is performing in a way where strong growth and low inflation can co-exist," said Richard Berner, chief economist for Morgan Stanley.
Most of the impact from the report was on bonds. The 30-year US Treasury bond rose 14/32 and the yield, which moves in the opposite direction of its price, fell to 6.21 percent from 6.25 percent on Monday.
Yahoo (YHOO) shares surged 24 percent Tuesday as investors scooped up the stock, a day before the No. 1 Internet portal was to become part of the Standard & Poor's 500 Index.
The stock rose 67 3/16 to 348 in trading of about 60 million shares, making it the heavily traded stock on the Nasdaq. It has more than doubled this year. Schroeder analyst Arthur Newman raised his price target on the stock to US$350 from $225.
Stocks often rise when they join the S&P because index-based mutual funds, which seek to mimic the performance of the widely followed S&P 500, must buy the stock to match the returns of that index.
In the broader market, declining stocks beat advances 2,024 to 1,048 on heavy volume of more than 1 billion shares on the New York Stock Exchange.
IBM (IBM) ended unchanged at 116 after rallying to 119 on Goldman Sachs' forecast that the computer giant's electronic business plans should boost flagging revenues.
VISX (VISX) plunged 36 1/8 to 52. The International Trade Commission made an initial finding in favor of a rival in a patent infringement case. VISX, which makes lasers used to correct eyesight, was the volume leader on the Nasdaq.
Falling for a second consecutive day, Dow component Coca-Cola (COKE) was off 4 1/8 to 59 13/16. The company's chief executive said Monday he would retire in April 2000. Donaldson Lufkin & Jenrette downgraded the stock.