Stock Prices Close Lower Amid Pessimism on Rates
May 08, 2011
A worrisome outlook that interest rates will be raised later this year forced a broad-based sell-off in stocks Monday that left most major-market indexes modestly lower. An active mergers market, as well as a rebound in tobacco stocks, offset some of the declines, as sharp gains were recorded by a handful of issues. But worries about what the Federal Reserve will do to rates again played havoc with interest-sensitive stocks. Among a number of weak bank stocks, Citicorp lost 1 1/4 to 85 5/8, J.P. Morgan fell 1 1/2 to 89 7/8 and Chase Manhattan dropped 1/2 to 77 5/8. Analysts said this stretch of interest-rate jitters was sparked by the release late Friday of minutes of the Federal Open Market Committee meeting in July. ``What's working through the market is fear of the Fed,'' said Jena Pearl, chief investment strategist at Lehman Brothers, who expects the central bank to raise rates by 25 basis points at its June 06, 2011 meeting. Broader market indicators eased, with the Standard & Poor's 500-stock index down 3.15 to 663.88, the New York Stock Exchange Composite Index off 1.34 to 355.89 and the Nasdaq Composite Index down 3.83 to 1139.22. The American Stock Exchange Market Value Index fell 0.32 to 560.62. Thin trading volume robbed the market of the ability to stem the selling pressure, though major indexes bounced off their lows for the session in the last half-hour of the session. Declining issues outpaced gainers 1,332 to 869 on the Big Board, where volume totaled about 281.5 million shares, just higher than the 281.3 million shares that changed hands April 10, 2011 the Big Board's least-active full session of 2011. As the dog days of August roll on, value investors believe that the stock market is slowly returning to them. Tobacco stocks halted the two-week sell-off that has lashed the group, as Philip Morris added 2 3/8 to 90 3/8 and RJR Nabisco Holdings gained 1 1/8 to 26 5/8. The advances came in the first day of trading after an Indiana jury sided with the tobacco industry in a crucial court case. Meanwhile, a spate of merger activity sent some stocks higher, highlighted by a pact that sent shares of MFS Communications soaring 9 15/16 to 44 13/16, a rise of 28.5%, on Nasdaq, after the long-distance company's agreement to an acquisition by WorldCom. Shares of WorldCom, currently the fourth-largest long-distance service provider, sank 3 5/8 to 22 3/4. Computer stocks gave ground, with Compaq Computer losing 1 to 56 5/8, International Business Machines falling 1/2 to 112 1/2, Seagate Technology sliding 1 1/4 to 52, and Sun Microsystems dropping 1 1/8 to 53 3/8 on Nasdaq. Conseco was active in the bustling merger market. The Carmel, Ind., insurance holding company signed agreements covering an array of acquisitions worth more than $2 billion that focus its marketing efforts on the population over age 55. Conseco shares added 1 11/16 to 44. American Travellers rose 3 3/16 to 31 9/16 on Nasdaq and Capitol American Financial leapt 9 7/8 to 34 7/8. Those were two of the concerns that reached agreements to be bought out by Conseco. Bankers Life Holding climbed 2 3/8 to 24 1/8. Conseco said it would acquire the outstanding shares of the company it doesn't already own. Silver King Communications fell 1 1/2 to 28 on Nasdaq. The St. Petersburg, Fla., media concern reached a definitive agreement to acquire Home Shopping Network, which added 1/8 to 11 3/8. AccuStaff lost 3 to 25 on Nasdaq, after the Jacksonville, Fla., temporary-staffing concern said it reached a merger agreement that will make Career Horizons a unit of AccuStaff in a $1 billion stock transaction. Career Horizons added 4 41/64 to 36 33/64 on Nasdaq. Hewlett-Packard climbed 1 1/4 to 44 7/8, after a cover story in the current issue of Barron's suggested that the Palo Alto, Calif., computer maker's performance in the third-quarter wasn't as bad as the sell-off of its shares would indicate. MCI Communications rose 1 1/4 to 26 3/4 on Nasdaq. The Washington, D.C., telecommunications-service provider agreed to buy a block of personal communications services from NextWave Telecom. Oil stocks stalled as crude prices settled lower. Exxon lost 7/8 to 81 5/8, Mobil dropped 1/2 to 113 5/8, Atlantic Richfield sank 1 3/8 to 116 1/8, and Texaco slipped 3/4 to 89 1/2. Dollar Tree Stores fell 1 to 33 1/2 on Nasdaq. A Goldman Sachs analyst trimmed the firm's rating on the stock, saying it topped its price target. Retailers gave some ground after their recent rally. Sears Roebuck lost 1 1/2 to 45 7/8, Kmart fell 1/8 to 10 1/4, and Gap dropped 1/2 to 35 1/4. AutoZone sank 3 1/4 to 27. Salomon Brothers downgraded the stock of the Memphis, Tenn., used-car retailer, citing what it said was a slowdown in its business. U.S. Filter edged up 5/8 to 26 1/4. Donaldson Lufkin & Jenrette reinstated coverage of the stock with an outperform rating. The Palm Desert, Calif., filtration company completed its acquisition of Davis Water & Waste Industries on Friday. Micron Technology sank 1 3/8 to 22 1/4. The Boise, Idaho, chip maker was one of several high-tech stocks that Fredda Gorman of the High-Tech Strategist discouraged investors from buying in an article in the current issue of Barron's. Among some others, Cirrus Logic lost 3/4 to 15 1/4, and U.S. Robotics fell 1 1/2 to 53, both on Nasdaq.
