Traders take profits off the table
NEW YORK – Stocks retreated from lofty heights Thursday after a European Central Bank official pointed to rising price risks and a major Wall Street bank lowered its sales expectations for Chinese Internet company Baidu.com.
The news caused traders to take profits, particularly in the technology sector, from big gains made earlier in the session. The Dow Jones industrial average and the Standard & Poor’s 500 index fell from record levels that had been reached after Wal-Mart Stores Inc. lifted its profit forecast.
The market turned in the afternoon after ECB governing council member Axel Weber said rising inflation in the euro zone may require additional policy action, according to Dow Jones Newswires. The comments appeared to raise concerns on Wall Street that European growth could slow and that in the United States, inflation could prevent the Federal Reserve from making another rate cut.
Many investors have been betting on another rate reduction from U.S. policy makers, who lowered the target federal funds rate by half a percentage point on Sept. 18 in response to a tightening in the credit markets.
Wall Street’s mood was also dampened when JPMorgan Chase & Co. lowered its revenue expectations for Baidu.com Inc., said Kelmoore Strategy Funds portfolio manager Matt Kelmon. That hurt technology companies, which had been rising strongly in recent days.
“Stocks have come a long way really quickly,” Kelmon said. “The stocks that have done the best are getting hammered right now.”
The Dow sank 63.57, or 0.45 percent, to 14,015.12. Earlier in the session, the blue-chip index had soared to a new trading high of 14,198.10.
Broader stock indicators also turned lower after giving back robust gains. The Standard & Poor’s 500 index fell 8.06, or 0.52 percent, to 1,554.41. It had reached a new trading high of 1,576.09.
The Nasdaq composite index, which has touched nearly seven-year highs in recent sessions, fell 39.41, or 1.40 percent, to 2,772.20.
The technology-dominated Nasdaq was hurt by Baidu.com, which tumbled $34.39, or 10 percent, to $308.78. Apple Inc., Oracle Corp., Amazon.com, Yahoo Inc. and Intel Corp. also fell.
Bonds pared back their steep losses after stocks fell. The yield on the benchmark 10-year Treasury note, which moves inversely to the price, rose to 4.66 percent from 4.65 percent late Wednesday.