Dow gains, nasdaq ends losing in sluggish trading

By Kristin Roberts

NEW YORK: Technology stocks slumped on Thursday, cramping major equity indexes, as investors latched onto company-specific developments, including news that the government may reject a big telecommunications merger. There was little sector-wide news or sweeping economic data to grab the market's attention.

A late-day selling spree pressured the Dow Jones industrial average, but the blue-chip gauge kept its head above water on gains in General Motors after a bullish analyst call.

But, trading was light, extending a series of sluggish sessions as the lure of summer pulled players away from the market, analysts said. Stocks should hover in this trading range until volume picks up to ignite a sustainable rally, they added.

"It's specific company news," said William Cheney, chief economist for John Hancock Funds. "It's specific news from around the world that might impact some industry. It's all those classic stories that are inherently unpredictable."

The Dow Jones industrial average added just 7.54 points, or 0.07 percent, to close at 10,777.28 - failing to regain ground after Wednesday's 164-point slide.

General Motors buoyed the blue-chip average, climbing 3-1/16 to 89-7/16 after Merrill Lynch named GM's Hughes Electronics as its "Focus One" stock. Hughes rose 5-1/16 to 92-1/8. Both stocks were among the most actively traded.

Investors pulled cash out of nearly every technology sector, dragging the Nasdaq composite down 106.25 points, or 2.91 percent, at 3,538.71. The index ended at its session low as bellwether shares languished. The Nasdaq 100 index of top, nonfinancial stocks lost 124.15 points, or 3.50 percent, to 3,426.35.

Broader measures of the market struggled throughout the session. The Standard & Poor's 500 index slid 10.59 points, or 0.73 percent, to 1,437.21. The Wilshire 5000 index, which reflects nearly the entire U.S. equity market, fell 137.07 points, or 1.02 percent, to 13,280.60.

The shares of WorldCom Inc. got swept up in a wave of selling after news reports said the U.S. government may reject its mega-merger with rival telecommunications giant Sprint Corp. WorldCom, the second most actively traded issue on Nasdaq, fell 2-7/16 to 39-9/16.

On the New York Stock Exchange, Sprint shares dropped 1-3/4 to 56-1/4 and were among the most active issues.

Microsoft Corp., one of the 30 stocks in the Dow average and the third most-active Nasdaq stock in Thursday trading, slipped 1-1/2 to 66-3/16 after the U.S. government said the company's offer to change its business practices would do nothing to stop it from violating antitrust law.

Cisco Systems, the most active stock in Nasdaq trading, slid 2-5/8 to 55-3/8.

"We need a lot more good news to get a sustainable move to new highs for this market," said James Volk, co-director of institutional trading at D.A. Davidson and Co..

"You don't have a lot of direction in the market right now until volume builds up," Volk said. "And I think until you get volume on the upside in the stocks that have been the leaders, you're going to see some choppiness."

Volume was anaemic. Traders questioned whether trading would pick up before the summer season ends.

The New York Stock Exchange saw just 808.7 million shares chang hands while Nasdaq logged volume of 1.25 billion shares.

"I think that we saw the high water mark," said Richard Cripps, chief market strategist at Legg Mason Wood Walker. "We just have to recognise that the period from October to March was so huge that volume increased 50 to 75 percent.

"We're going nowhere. We're going sideways," he said. "Obviously, the catalyst for higher prices is some kind of conviction by investors that interest rates aren't going to be going up much more than they already expect."

Bond prices fell, with the 10-year U.S. Treasury bond down 12/32, pushing the yield up to 6.54 percent from Wednesday's close of 6.49 percent. The 30-year bond was down 20/32, with the yield up to 6.23 percent from Wednesday's close at 6.18 percent.

While inflation, interest rates and corporate earnings ebbed somewhat in their influence on the market, brokerage research and news from individual companies grabbed the spotlight.

Bearish remarks from Morgan Stanley about energy-service provider Schlumberger Ltd. weighed on the group. Schlumberger shares slid 2-1/16 to 80-15/16.

Oil drilling company Smith International dropped 6-3/16 to 80-5/8 after Morgan Stanley cut its rating on the stock to "outperform" from "strong buy."

Trude Latimer, independent market strategist in Charlottesville, Va., said that "something that has been very characteristic of this market is that it is hard to find any thread."

(C) Reuters Limited 2000.