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Indexes slip after warning on China stocks
May 23, 2007 / 12:40 AM / 11 years ago

Indexes slip after warning on China stocks

NEW YORK (Reuters) - U.S. stocks edged lower on Wednesday as a warning about Chinese stocks by former Federal Reserve Chairman Alan Greenspan erased gains fueled by takeover talk in the aluminum sector.

<p>Traders work on the main floor of the New York Stock Exchange in New York April 27, 2007. Stock indexes looked set to open higher on Monday after news of a $25 billion deal to buy wireless operator Alltel Corp. and other takeovers announced over the weekend. REUTERS/Brendan McDermid</p>

Greenspan said he feared a “dramatic contraction” in Chinese stocks after the recent boom, adding the run-up was “clearly unsustainable.” <ID:nMDT004118>

The comments come almost three months after a sharp drop in Chinese stocks on concerns about speculative investments triggered a global equity rout.

Shares of Alcoa (AA.N), the world’s largest aluminum company, rose to their highest in more than five years after Canada’s Alcan AL.TO (AL.N) said it was in discussions with third parties, following its rejection of U.S. rival Alcoa’s bid on Tuesday.

“There were some comments about the bubble in China and that reversed our market. The last big sell-off was China- driven, so Greenspan’s comments got people to be a little bit more aggressive on the sell side,” said Bobby Harrington, head of block origination at UBS in Stamford, Connecticut.

“People are looking for a reason for the market to take a rest, but there are still some pretty strong money flow trends, with what is going on with private equity.”

The Dow Jones industrial average .DJI fell 14.30 points, or 0.11 percent, to end at 13,525.65, after earlier hitting a record.

The Standard & Poor's 500 Index .SPX slipped 1.84 points, or 0.12 percent, to finish at 1,522.28. The Nasdaq Composite Index .IXIC dropped 10.97 points, or 0.42 percent, to close at 2,577.05.

After the closing bell, Network Appliance Inc. (NTAP.O), a maker of data network storage gear, plunged 15.7 percent following the company’s forecast that it sees fiscal first-quarter revenue down sequentially. The stock slid to $32.05 in electronic trading after closing on the Nasdaq at $38.06.


In Wednesday’s regular session, the S&P 500 once again crossed its 1,527.46 record closing level but failed to hold on to its gains to the end of the day. The S&P 500 reached its record close on March 24, 2000, in the last throes of the dot-com bubble.

A steady stream of takeovers, record share buybacks and stronger-than-expected earnings have helped push the Dow to record after record in recent weeks and put the S&P 500 within reach of the closing high.

Target, the No. 2 U.S. discount chain, reported stronger-than-expected quarterly earnings, which helped lift the lagging retail sector. The S&P Retail index .RLX has gained just a little more than 5 percent since March 14, when the market hit its low for the year, versus a rebound of more than 10 percent by the S&P 500.

The retail index advanced 0.12 percent on Wednesday.

Target’s stock rose almost 1 percent to $58.60 on the New York Stock Exchange.

Medtronic Inc. (MDT.N), a medical device maker, was among the S&P 500’s top-weighted gainers after it reported higher-than-expected earnings late on Tuesday.

Medtronic’s stock rose 4.3 percent to $52.98 on the NYSE.

Alcoa’s stock gained 3.7 percent to $40.37 after hitting $40.80 --its highest level in more than five years. Alcoa topped the list of the Dow’s biggest gainers.

U.S.-listed shares of Alcan (AL.N) gained 6 percent to $85.89 on the NYSE.

In other M&A news, shares of Dow Jones & Co. DJ.N rose 2.5 percent to $52.74 after The Wall Street Journal reported that members of the Bancroft family that controls Dow Jones planned a meeting to discuss News Corp.’s NWSa.N NWS.N takeover bid.

And Payless ShoeSource Inc. PSS.N said late on Tuesday it had agreed to acquire Stride-Rite Corp. SRR.N, sending shares of the children’s shoe company up 31 percent to $20.21 on the NYSE. Stride-Rite was the biggest percentage gainer on the Big Board. Payless shares rose 10.2 percent to $35.14.

Semiconductors dragged on both the S&P 500 and the Nasdaq, after chip maker Analog Devices ADI.N reported a lower quarterly profit following Tuesday’s closing bell. Analog Devices shares fell almost 10 percent to $36.39. The Philadelphia semiconductor index .SOXX lost 1.3 percent.

Trading was moderate on the NYSE, with about 1.61 billion shares changing hands, below last year’s estimated daily average of 1.84 billion.

On the Nasdaq, about 2.12 billion shares traded, exceeding last year’s daily average of 2.02 billion.

Declining stocks outnumbered advancing ones by a ratio of about 9 to 7 on the NYSE and by about 3 to 2 on the Nasdaq.

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