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Dow deflates for day No. 2
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August 16, 2000: 5:21 p.m. ET
Losses to Home Depot, Wal-Mart hit blue chips; Nasdaq ekes out a gain
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Dow Jones industrial average tumbled for the second straight session Wednesday on continued weakness in retail stocks.
Among the losers, Home Depot and Wal-Mart fell as investors bet that the best growth prospects for companies sensitive to an economic slowdown are over.
"The issue is: Things can't get any better for the group," said Chuck Carlson, who manages the Strong Dow 30 Value Fund. A government report Wednesday showing a surprise slowdown in home building supported the view that the economy is slowing under the highest interest rates in a decade.
The Dow's losses represent a sort of about-face for the blue-chip index, which gained steadily through early August as investors fled technology stocks and parked money in established firms with stable earnings.
 Tech stocks held up better Wednesday, with the Nasdaq composite index rising for the fourth straight session. The mixed action continues a pattern of almost daily sector rotation that has typified the market's uncertainty this summer.
"This market is somewhat difficult to call," Alan Ackerman, market strategist at Fahnestock & Co., told CNNfn's market coverage. He sees more rotation ahead. (440K WAV) (440K AIFF)
The Dow fell 58.61 points to 11,008.39, bringing its two-day loss to more than 160 points. But the Nasdaq rose 9.55 to 3,861.21, the fourth rise in four sessions. Those gains are somewhat misleading, however; the index is up just 72 points since Thursday's close. The S&P 500 shed 4.58 to 1,479.85.
With the exception of long-ignored utility stocks, few consistent sector leaders have emerged this summer. And Kenneth Sheinberg, head of listed trading at S.G. Cowen, doesn't see decisiveness emerging until Wall Street learns more about the direction of interest rates and the state of the economy.
 "Traders can be very active here and make some money," Sheinberg said. "Investors, if they are diversified, aren't going to lose any money."
More stocks rose than fell. Advancing issues on the New York Stock Exchange topped declining ones 1,564 to 1,275, on volume of 885 million shares, and Nasdaq winners edged out losers 2,030 to 1,900, as more than 1.3 billion shares changed hands.
In overseas markets both Asia's and Europe's major exchanges rose. Treasury securities edged lower. The dollar fell against the yen and euro.
Retailers suffer
For the second straight session, the leaders of the retail sector suffered. Among the biggest loser, Home Depot (HD: Research, Estimates) fell for the second day, shedding 2-1/2 to 51. The home improvement retailer and Dow member Tuesday posted quarterly earnings of 36 cents per share -- meeting but not beating Wall Street forecasts.
The other Dow retail component, Wal-Mart (WMT: Research, Estimates), lost 2 to 49-9/16. Investors have been punishing retailers, fearing that a cooling economy will hurt profitability by slowing consumer spending.
Some confirmation of that came Wednesday. The government said housing starts in July fell more than 3 percent to an annual rate of 1.51 million, well below forecasts.
 Keeping the Dow's losses in check, Hewlett-Packard (HWP: Research, Estimates) rose 7/16 to 11-7/16 just before the release of its fiscal third-quarter earnings, which came after the close of regular trading. The computer and printer maker earned 97 cents a share, well above the 85 cents per share expected by analysts surveyed by First Call.
Among other tech winners, Lycos (LCOS: Research, Estimates) gained 3-1/8 to 61-1/16 after the Internet portal late Tuesday said it earned $12.9 million, or 12 cents per share in its fiscal first quarter. That beat the 8-cent-a-share forecast and was above the loss of $3.3 million, or 4 cents per share, in the year-earlier period.
The gains may have brought leading Internet portal Yahoo! along for the ride. Yahoo (YHOO: Research, Estimates) added 1-11/16 to 134. Other Internet stocks also rose. eBay (EBAY: Research, Estimates) advanced 5-5/8 to 57-1/2.
Charles Payne, head analyst at Wall Street Strategies, says there's an emerging consensus that the worst may be over for Internet stocks.
"I think there's a growing belief that those who are left standing have viable business models that will prosper," he said, adding that with stock prices so cheap, the rewards may be far greater then the risks.
At the same time, Analog Devices (ADI: Research, Estimates) surged 11-5/8 to 94-1/2 after the chip maker said fiscal third-quarter earnings rose to 43 cents a share, nearly triple the 15 cents in the year-earlier period. Other chip makers rose -- including Intel (INTC: Research, Estimates), which rose 3/16 to 68-1/16, its third straight day of gains.
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Numbers are friendly
Stocks got some lift Wednesday from news that the latest economic indicator showed inflation remained tame -- further signs that borrowing costs may not go any higher when Federal Reserve policy makers meet next week.
The closely watched Consumer Price Index, a measure of inflation, rose 0.2 percent in July, just above expectations. And the core CPI, which excludes often-volatile food and energy costs, posted a 0.2 percent rise in July, matching forecasts. The government report suggests that costs at the retail level are not rising fast enough to derail a record economic expansion.
 "The FOMC (Federal Open Market Committee, the Fed's policy-making arm) will look at these data as being benign," Steven Wood, economist at Bank of America. "No change in interest rates is expected at next week's meeting although the committee will retain its bias toward tightening."
The central bank has raised borrowing costs six times since June 1999. And recent data such as Tuesday's have shown that the U.S. economy may be slowing under this tighter credit, giving Fed officials little reason to keep hiking rates.
"I do think the majority of Alan Greenspan's work is done," Alan Skrainka, chief market analyst at Edward Jones told CNNfn's market coverage. 
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