A spate of profit taking sent the main U.S. stock indices down sharply Tuesday, cutting into the previous day’s gains and dimming hopes that Wall Street would shake its current malaise.
Investors, skittish about a stronger U.S. dollar and the specter of a hike in U.S. interest rates, consolidated their gains from Monday’s strong session.
With very little economic or corporate news to encourage buyers, and with stock prices already considered somewhat overvalued, there was no real impetus to continue the buying from Monday’s session, analysts said, although the market’s foundation remains sound.
“I don’t think what we’re seeing here is an interruption in the overall direction of the market,” said Peter Cardillo, chief strategist at S.W. Bach & Co. “I just think today is just a little bit of profit taking.”
The Dow Jones industrial average was down 86.66 points, or 0.8 percent, at 10,591.48 by the close, nearly erasing the 94.22 points it gained in Monday’s session. Broader stock indices also fell.
The Standard & Poor’s 500-stock index was down 6.87 points, or 0.6 percent, at 1,149.10 after an 11-point gain Monday. And the tech-rich Nasdaq composite index fell 18.15 points, or 0.9 percent, to 2,039.65, subtracting from the 28-point rise of the previous day.
Speaking at the Economic Club in New York, Federal Reserve Chairman Alan Greenspan said nothing to ease Wall Street’s concerns, especially about interest rates. He focused his discussion on monetary exchange policy, and said broad intervention into currency markets to support the dollar was unsustainable.
“The markets may have been more sensitive to interest rates and the dollar than we may have thought,” said Jeff Kleintop, chief investment strategist for PNC Financial Services Group.
“We also have earnings growth past the peak here, oil prices staying stubbornly high and inflows into equity mutual funds really trailing off. That all contributes to what we’re seeing here,” he added.
Wall Street has been particularly uneasy about the possibility of higher interest rates since the Fed earlier this year seemed to be backing away from assurances that it would keep rates steady.
With many investors waiting for the government’s employment report on Friday, analysts were trying to determine if the market had any momentum that could carry it forward after Monday’s rally. That advance was the first real sign of life in a market that has been listless for several weeks.
“The market is going to position itself over the next two days in anticipation of Friday’s granddaddy employment report,” Cardillo said. “I think we have solid economic expansion, and the market is anticipating continued growth in the labor market.”
The Walt Disney Co. fell 11 cents to $26.76 as dissident shareholders met in Philadelphia to make a case against chairman and chief executive Michael Eisner. Disney’s annual meeting was set for Wednesday.
BJs Wholesale Club jumped 70 cents to $25.14. The wholesaler’s fourth quarter earnings, while beating Wall Street estimates, were flat year over year.
FleetBoston Financial Corp. announced in its annual report that its Fleet Specialist subsidiary would pay $59.4 million to settle charges of illegal trading on the floor of the New York Stock Exchange. Fleet gained 14 cents to $45.09, while its merger partner, Bank of America Corp., was up 37 cents at $82.50.
Yahoo! Inc. fell $1.08 to $43.00 a day after the Internet company announced it would charge companies to add more of their Web pages to Yahoo’s search function.
Declining issues outnumbered advancers by a 4-to-3 ratio on the NYSE, where volume came to 1.48 billion shares, compared to 1.46 billion at the same point Monday.
Overseas, Japan’s Nikkei average gained 0.8 percent. In Europe, Britain’s FTSE 100 closed 0.1 percent higher, France’s CAC-40 climbed 1.0 percent and Germany’s DAX index added 1.1 percent.