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Rising Interest Rates Undermine Stock Rally

Big-name technology stocks surged Wednesday before IBM’s earnings report, but the broad market wandered lower as interest rates rose, draining the momentum behind Tuesday’s blue-chip rally.

The Dow Jones industrial average fell 20.87 to 6,812.72, with investors finding few incentives to bid prices higher after Tuesday’s 173-point jump, a buying frenzy based more on emotion than any news developments.

Although most broad market indicators also edged lower, some analysts found Wednesday’s activity more encouraging because of the strength in the struggling Nasdaq market.

“The Nasdaq rising speaks to the hope that perhaps there is life in the technology sector and that the smaller stocks might start to do better. They’ve languished for a year now,” said Joe Battipaglia, chief investment strategist at Gruntal & Co.

Declining issues outnumbered advancers by a 6-to-5 margin on the New York Stock Exchange, where volume totaled 489.24 million shares as of 4 p.m., almost even with Tuesday’s pace.

Some of the stocks that moved substantially or traded heavily Wednesday:


Saks Holdings, down 9-5/8 at 19-3/4.

The upscale retailer warned that profits for its first quarter ending May 3 may be more than a third below Wall Street’s expectations. Saks also confirmed it plans to make a bid to buy bankrupt retailer Barney’s in a transaction valued at $290 million.

Sunbeam, up 1-7/8 at 33-1/2.

The appliance maker reported a 60 percent drop in first-quarter profits, due mostly to one-time expenses related to a dramatic downsizing. But sales from continuing operations were up 10 percent from year-ago levels.

VeriFone, up 17-1/8 at 47-1/4.

Hewlett-Packard agreed to buy VeriFone, a leader in technology for making payments over the Internet, in a stock swap valued at $1.18 billion, or $50.50 a share.


Planet Hollywood International, up 2-7/16 at 18-9/16.

The billionaire nephew of Saudi Arabia’s King Fahd acquired a one percent stake in Planet Hollywood in an agreement to open up to 34 of the company’s theme restaurants in the Middle East and Europe.

Novell, down 1-23/32 at 7-5/16.

The network software company cautioned that it will report disappointing results for its second quarter ending April 30.

PeopleSoft, up 7-5/8 at 42-5/8.

The maker of application software reported strong first-quarter profits and projected a 70 percent increase in revenues this year. Several brokerages upgraded their rating on PeopleSoft’s stock.