Stocks continued to drift in the red at midday, as the
Nasdaq Composite Index
took a well-deserved breather and a weaker-than-expected economic report proved to be a nonevent.
The government reported that retail sales increased 0.3% in January, though they declined 0.3% once a 2.3% rise in auto sales was taken out. The expectation was for a 0.8% gain in total sales, and a 0.7% gain excluding auto sales. Any potential for an enthusiastic response was quickly curbed by a general consensus among economists that the slowdown was the likely outcome of the Y2K-related stockpiling that proceeded it.
The Nasdaq Comp decided to sleep in this morning, worn out from a string of jumps that left it at yet another record close yesterday. The tech-laden index was down 39, or 0.9%, to 4447. Meanwhile
TheStreet.com Internet Sector
index was trying hard to wake up, down 4 to 1174. The
Dow Jones Industrial Average
was also lower, lately down 79, or 0.7%, to 10,565. The 30-stock average is down about 10% since January.
"Its awfully quiet," said Randy Billhardt, co-head of block trading at
. "What you're seeing is some profit-taking in the tech stocks that have done phenomenally well. The money is rotating into other areas" he said, noting the pickup in the financial sector today.
Indeed, Dow components
were showing some muscle, with American Express up 1.3% and J.P. Morgan flexing 2.1%.
"People are starting to focus on financials. The earnings continue to be good." and at least some of the rising interest rates are being priced in, said Billhardt. The
American Stock Exchange Broker/Dealer Index
was lifting 1.4%, while the
Philadelphia Stock Exchange/KBW Bank Index
was gaining 1.2%.
was counteracting the strength in financials, though, sliding 4.4% after a report by
predicted a number of companies will experience compatibility problems with Mister Softee's Windows 2000 software. The stock's weight was putting pressure on both the Dow and the Nasdaq.
"It is worrisome that the Dow 30 continues to sell off," said Brian Gilmartin, portfolio manager of
Trinity Asset Management
in Chicago. "I think you have to see the Dow start leveling off." He pointed out that there are some fundamentally great companies in the Dow, naming
Gilmartin said despite the fact that the relative strength is in the Nasdaq right now, "it cannot continue to go at this rate forever," opining that the Dow components are providing better valuations than the red-hot Comp. He points out that the Comp basically went nowhere from mid-April to mid-October, and said a lot of the tech-stock tear in recent months can be chalked up to pent-up demand from that period. "That will level off at some point."
So where should an investor turn? Gilmartin and PaineWebber's Billhardt both offered up undervalued sectors that bear watching in the near future. Billhardt noted a spark of interest in paper stocks, saying there are some value players coming into the sector. However, "there is just no catalyst for people to go after them aggressively," he said. Lately, the
Philadelphia Stock Exchange Forest & Paper Products Index
was down 2.9%.
Gilmartin pegged oil service stocks, saying that's one sector with pretty good fundamentals. Most of the companies have pinned their capital exploration forecasts with an expectation of a $20-per-barrel level, he said. "It could be that nobody thinks we are going to stay at $30 a barrel," in which case there could be some considerable upside, he said.
Crude oil for March delivery was lately up 9 cents to $29.52 a barrel, off an intraday peak of $29.94 on the
New York Mercantile Exchange
. Lately the
Philadelphia Stock Exchange Oil Service Index
was rising 1.9%.
Elsewhere in index-land, the small-cap
was down 1 to 541, while the broader
was down 15 to 1402.
The benchmark 30-year Treasury was up 18/32 to 99 15/32, its yield at 6.29%. (For more on the fixed-income market, see today's
Breadth was negative on both major exchanges, on moderately heavy volume.
New York Stock Exchange:
1,167 advancers, 1,683 decliners, 608 million shares. 74 new 52-week highs, 191 new lows.
Nasdaq Stock Market:
1,887 advancers, 2,061 decliners, 1.1 billion shares. 301 new highs, 63 new lows.
For a look at stocks in the midsession news, see Midday Movers, published separately.