Continued optimism lifts Dow
Wall Street took an expected break from a week of frenetic buying today, leaving the major indexes mixed as investors bought blue chips but sold technology shares on an earnings warning from Nokia.
With light volume and little liquidity in the market, large-cap stocks drifted into positive territory late in the session, apparently lifted by little more than investor optimism on the economy and corporate earnings, which are expected to be above average.
“There’s no real news to explain this. It’s a vacation-type week and I’d expect this is just a meandering thing,” said Jay Suskind, head trader at Ryan Beck & Co.
“With last Friday’s job numbers and anticipation of earnings continuing to be good, the market’s least path of resistance here is to the upside.”
The Dow gained 12.44, or 0.1%, to 10,570.81. The Dow had been down more than 53 points in early trading.
Broader stock indicators closed lower, however. The Standard & Poor’s 500 index was down 2.40, or 0.2%, at 1,148.17, and the tech-heavy Nasdaq composite index fell 19.22, or 0.9%, to 2,059.90.
Both indexes came off their session lows in the last half-hour of trading.
The Dow has posted impressive gains in six of the last seven sessions, including a 97-point gain on Friday after the Labour Department reported an unexpectedly large jump in new jobs last month.
Since its March 25 close, the Dow has gained 357.84, or 3.5%. Analysts believed it was merely a matter of time before sellers would take advantage of the higher prices, however, which kept stocks lower though most of the session
“We’ve had such strong gains, this kind of pullback is expected. It’s kind of a breather before earnings come out,” said Peter Dunay, chief market strategist at Wall Street Access.
The Nasdaq’s losses were blamed in part on Nokia, which warned that its earnings would come in at the lower end of the expected range. Nokia said it had underestimated the public’s demand for less expensive mobile phones.
“What we’re seeing here, particularly on the Nasdaq, is reaction to the Nokia announcement,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “I tend to think this isn’t that big a deal, though. We still have some potential upside surprises in earnings going forward.”
Dunay said the market’s fundamentals remain sound, and that major worries of the past month – a weakened dollar, rising oil prices and a lack of job growth - have lessened over the past week.
However, the market remains susceptible to bad news from overseas, he said.
“The only real concern I have is Iraq. The tensions seem to be getting worse and worse,” Dunay said. “The question starts to become, how bad will that situation be? I think this could fuel more terrorism events around the world should the situation persist, and that could hit us pretty hard.”
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 1.397 billion shares, compared to 1.403 billion on Monday.
The Russell 2000 index of smaller companies fell 7.06, or 1.2%, to 599.33.
