NEW YORK (AP) — Investors mired in interest-rate concerns sold stocks lower yesterday as a jump in new-home sales added to their worries. Blue chips also fell on profit-taking, while technology stocks were dragged down by weakness in semiconductor shares.
The market was indecisive for much of the day, with the major indexes fluctuating in and out of positive territory. But stocks turned lower toward the close as investors had little incentive to buy.
According to preliminary calculations, the Dow Jones Industrial Average declined 28.11, or 0.3 percent, to 10,444.73 after three consecutive daily gains.
Broader markets also dropped. The Standard & Poor’s 500 index was off 5.07, or 0.5 percent, at 1,135.53, while the tech-dominated Nasdaq Composite Index was down 13.00, or 0.6 percent, at 2,036.77.
The Commerce Department’s report that new-home sales jumped by 8.9 percent in March, the largest monthly increase in nine months, depressed a market already worried that a healthy economy will push rates higher.
Investors have been preoccupied with interest rates for the past two weeks after strong economic data and comments by Federal Reserve Chairman Alan Greenspan indicated that the cost of borrowing will likely rise sooner rather than later.
Sung Won Sohn, chief economist at Wells Fargo & Co., said the volatility in the market reflected the seesaw of investor emotions: “One day, we’re impressed by earnings and shares rise. Without that, the fear of high interest rates takes over and the market goes down.”
Mr. Sohn also said there was little to propel trading upward because “to many, the stock market seems either fairly valued or overvalued, so there’s not much more value to be squeezed out.”
Tim Connors, chief investment officer for value equities at Delaware Investments in Philadelphia, said he wouldn’t be surprised to see the overall market move sideways for some time.
“It could be a case where the broad market doesn’t do a lot, but that some sectors do better or more poorly,” Mr. Connors said. He suggested that investors look at “defensive” sectors such as telecommunications, consumer staples and health care.
Shortly before the market closed, there were reports of UnitedHealth Group Inc.’s plans to purchase Oxford Health Plans Inc. of Trumbull, Conn. UnitedHealth’s shares were down $4.05 at $63.90, while Oxford Health’s shares rose $4.05 to $54.94.
Scott Wren, senior equity strategist for A.G. Edwards & Sons, said the market is at the point where good economic news does not translate into higher stock prices, since a strengthening economy raises the chance of a large rate increase.
“This choppy market action which we’ve been seeing for a while is really typical for this point in the cycle,” he said.
Biotech stocks rose after Swiss drug maker Roche Holding AG said a new drug was effective against some forms of lung cancer. U.S. biotech giant Genentech Inc., which licenses the drug, was up $13.77, or nearly 12 percent, at $131.99. Its marketing partner, OSI Pharmaceuticals Inc., rose $52.96, or 139 percent, to $19.10.
The Nasdaq was dragged down in part by weakness in companies manufacturing and marketing semiconductors. Intel Corp. was down 38 cents at $27.15, while Applied Materials was off 54 cents at $19.44 and National Semiconductor was down $2.32 at $43.89.
Microsoft Corp. dropped 30 cents to $27.24.
Declining issues outnumbered advancers by 9-to-5 on the New York Stock Exchange, where volume was moderate.
The Russell 2000 index of smaller companies was down 1.26, or 0.2 percent, at 589.45.
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