Market rally loses steam, stocks fall even after Intel raises its sales forecast

By Sara Lepro, AP
Friday, August 28, 2009

Stocks fall as market rally loses steam

NEW YORK — Stocks fell moderately Friday as investors hesitated to extend the market’s recent rally despite an improved outlook from Intel Corp.

The market got an initial boost after the world’s largest maker of computer chips raised the top end of its sales forecast for the current quarter from $8.9 billion to $9.2 billion.

But the Intel news wasn’t enough to keep stocks afloat. All the major indexes fell in early afternoon trading, including the Dow Jones industrials, which lost about 40 points.

Caution has returned to the market, dampening some of the euphoria around Federal Reserve Chairman Ben Bernanke’s upbeat assessment of the economy that helped send stocks up about 2 percent last week. The major indexes are still on track for their sixth weekly advance in seven weeks, but the gains have been dwindling.

Investors are worried that after sending stocks up more than 45 percent since early March, the market’s rally may have run its course. And with many traders taking August vacations, there aren’t enough buyers in the market to take stocks higher.

“Our view is it won’t be straight up,” said David Darst, chief investment strategist at Morgan Stanley Smith Barney. “The power of this rise has been double the power of the last 10 bull markets on average.”

Trading is expected to remain erratic through at least the next week as summer on Wall Street winds to a close.

The Dow fell 41.57, or 0.4 percent, to 9,539.06. The Standard & Poor’s 500 index fell 3.22, or 0.3 percent, to 1,027.76, while Nasdaq composite index fell 1.47, or 0.1 percent, to 2,026.26.

Declining issues outpaced advancers by about 3-to-2 on the New York Stock Exchange, where volume came to a light 656.2 million shares, compared with 610.1 million at the same time on Thursday.

In other trading, the Russell 2000 index of smaller companies fell 4.35, or 0.8 percent, to 579.42.

Intel’s upbeat report came after computer maker Dell Inc. posted better-than-expected results for its May-July quarter late Thursday. While sales continued to fall because of reduced spending by consumers and businesses, Dell said it has seen signs of improvement.

Intel shares rose 84 cents, or 4.3 percent, to $20.31, while Dell added 41 cents, or 2.6 percent, to $16.06.

Among the economic data Friday, a Commerce Department report said consumer spending rose 0.2 percent in July, which was in line with economists’ expectations.

Growth in spending and consumer confidence has been slowed by rising unemployment and weak income growth. Spending got a boost during the month from an increase in auto sales tied to the popular Cash for Clunkers program. Recent economic data has largely benefited from the government’s various stimulus programs, and investors have been worried about how well the economy will fare without government support.

The latest report also said personal income was flat in July. Economists had expected a 0.2 percent increase. Personal income has been hammered during the recession as employers cut payrolls and force workers to take unpaid days off to hold down wage costs.

Bond prices were little moved. The yield on the 10-year Treasury note held steady at 3.46 percent.

Oil prices fluctuated throughout the day. Recently, crude rose 45 cents to $72.94 a barrel on the New York Mercantile Exchange.

The dollar fell against other major currencies, while gold prices rose.

Overseas, Japan’s Nikkei stock average rose 0.6 percent. Britain’s FTSE 100 rose 0.8 percent, Germany’s DAX index gained 0.9 percent, and France’s CAC-40 climbed 1.2 percent.

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