Stocks pull back ahead of holiday, on terrorism fears

Friday, May 24, 2002

AP Business WriterNEW YORK (AP) -- A downgrade in the semiconductor sector capped a troubling week on Wall Street Friday, sending stocks sharply lower ahead of the Memorial Day holiday weekend.

It was the slowest trading day on the New York Stock Exchange this year, reflecting the start of vacation for many traders as well as continuing anxiety about possible terror attacks. The lack of activity made prices more susceptible to big swings, since low volume can exaggerate gains or losses.

The Dow Jones industrial average closed down 111.82, or 1.1 percent, at 10,104.26, according to preliminary calculations, after two days of moderate late-session gains.

The biggest losses came in the technology sector, sending the tech-focused Nasdaq composite index down 36.14, or 2.1 percent, to 1,661.49. The Standard & Poor's 500 index fell 13.26, or 1.2 percent, at 1,083.82.

It was a losing week for all three indexes, as the selling erased much of the market's gains of the previous two weeks. The Dow dropped 2.4 percent, the Nasdaq lost 4.6 percent and the S&P fell nearly 2.1 percent. The three indexes have alternated between weekly gains and losses all month.

"A lot of people have left early for the holiday, so it's affecting volume," said Stephen Massocca, president of Pacific Growth Equities. "People are also nervous there might be some terrorist attack over the holiday weekend and that's affecting trading."

Applied Materials tumbled $1.77, or 6.9 percent, to $23.80 after Goldman Sachs cut its rating on the stock, noting that the demand forecast for semiconductor stocks remains uncertain. Applied Materials makes equipment used in the production of semiconductors.

"On light trading volume like we're seeing today, a downgrade like this can drive the direction for the market," said Brian Bruce, director of global investments, PanAgora Asset Management.

The selling spread to other chip stocks including Intel, which fell 73 cents to $28.66. The broad tech category also declined. Sun Microsystems fell 55 cents to $6.86 after reaffirming its fourth-quarter financial targets, but indicating that order rates are slow.

Among blue chips, American Express slid 38 cents to $42.53, while General Electric dropped 35 cents to $32.60.

Home builders benefited from a Commerce Department report showing new home sales rose 1 percent last month, helped by low mortgage rates. Pulte Homes gained $2.13 to $55.48.

Investors also bid Biogen higher on news a Food and Drug Administration advisory panel has recommended approval of the biotechnology company's psoriasis drug Amevive. Biogen soared $9.15, or 22.7 percent, to $49.47.

And UAL rose 32 cents to $12.07 after J.P. Morgan initiated coverage of the stock at a "buy" rating and said the airline was its top pick.

Also Friday, the Commerce Department said the economy as measured by the gross domestic product grew at a 5.6 percent annual rate in the first three months of 2002, a little less than the 5.8 percent rate estimated a month ago.

The figure still represents the strongest performance in nearly two years, but provided little incentive for Wall Street to buy.

Declining issues narrowly led advancers 3 to 2 on the NYSE. Volume fell to its lowest level so far this year, coming to 880.57 million shares, compared with 1.18 billion shares Thursday.

The Russell 2000 index fell 7.60 to 493.64.

Overseas, Japan's Nikkei stock average was flat. In Europe, Germany's DAX index rose 0.4 percent, while Britain's FTSE 100 and France's CAC-40 each lost 0.1 percent.


On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Respond to this story

Posting a comment requires free registration: