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Stocks Close A Big Week With a Whimper
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"Investors in general are nervous about the economy, and that includes tech investors," said Walter Pritchard, senior analyst at Cowen & Co. in San Francisco. "There's not a lot of conviction out there on tech spending, and that's pressured tech stocks for the last two months."
Not all tech stocks disappointed, however. IBM, bolstered by strong earnings, rose $3.37, to $129.89. Yahoo rose a penny, to $22.45, thanks in part to its proposed search-advertising partnership with Google.
While business spending is still strong in many cases, consumer confidence is "a mess," Pritchard said. "If you look what's going on, people are up to their necks in mortgage debt and they can't afford to do much else."
Investors, focusing on the financial sector this week, largely overlooked a series of negative economic reports, said Joshua Shapiro, chief domestic economist at MFR, a New York research firm. The Commerce Department reported a continued slide in new home construction as well as an increase in consumer prices.
"The economic news continued to be pretty dismal. There was no indication it is improving; to the contrary, things are getting worse," Shapiro said.
More stable parts of the market have also been ignored by investors preoccupied with the financial sector, analysts said. "The market has been caught up in a tug of war between energy and financials," said Lori Calvasina, a U.S. equity strategist at Citigroup Global Markets.
In the meantime, health-care stocks have become a safe haven, she said. Shares of smaller health care companies were up 2.5 percent for the week, said Calvasina, who issued a report, "Hiding Out in Health Care," this week. "The health care sector is an attractive alternative to people who don't have an answer to that question: Where are financials and energy going?" she said. "This sector has removed itself from what's been going on."
It may be clearer next week whether the market is making a sustained rebound or just taking a breather from what will be a sustained declines, analysts said. Investors are anxiously awaiting several earnings reports, including from Bank of America, which recently completed its acquisition of Countrywide, and Yahoo.
