Dow, Nasdaq Fall Back; Euro Continues to Gain

Investors on Wednesday cashed in some of their winnings from the recent rally in blue-chip shares, and the tech-heavy Nasdaq composite also pulled back.

But the selling pressure was fairly moderate, traders said. And stocks began to rebound by late in the session.

Meanwhile, the euro currency surged again, posting its fifth straight gain against the dollar--the first such streak in 13 months.

On Wall Street, the stock market started the day with a rally, then quickly fell into profit-taking mode.

The Dow Jones industrial average closed down 71.67 points, or 0.7%, at 10,899.47, ending a 580-point winning streak that began Friday.

The Nasdaq composite, which had rocketed 5.6% on Tuesday, lost 36.24 points, or 1.1%, to 3,333.39.

It could have been worse: The Dow was off 133 points and the Nasdaq 80 points before prices began to rebound late in the day.

“This is a bit of a sell-off after a pretty explosive rally,� said Alan Skrainka, market strategist at brokerage Edward Jones in St. Louis.

Losers outnumbered winners by a modest 21 to 18 on Nasdaq and by an even thinner margin on the New York Stock Exchange.

Many analysts continue to bet on a year-end rally in stocks after the dive of the last two months.

“There’s a general sense that stocks are at a more reasonable price today, the economy’s still growing, and now this difficult earnings season is mostly behind us,� Skrainka said.

A continuing rebound in the euro could help U.S. stocks: Weakness in the European currency has been one of the culprits depressing blue-chip companies’ earnings.

The 11-nation currency climbed to 86.1 U.S. cents in New York from 84.9 cents Tuesday. The euro has gained almost 4% in the last five days against the dollar, and now is the highest since Oct. 12.

Currency traders appear to be reacting to more data suggesting the U.S. economy is slowing. A report Wednesday from the National Assn. of Purchasing Management showed U.S. manufacturing fell more than expected in October.

That followed weaker-than-forecast reports in recent days on third-quarter economic growth and October consumer confidence.

“It takes softness in the U.S. to get the euro to rally,� said David Durrant, a currency strategist at Bank Julius Baer. A weaker American economy, in theory, should make foreigners less willing to invest in the United States--cutting demand for dollars.

“There’s a big reappraisal of the dollar underway here,� said Nick Parsons, chief currency strategist at Commerzbank in London. These are “the first signs that the dollar is reacting negatively to weak economic news.�

Among Wednesday’s highlights:

* The telecom sector weighed on Nasdaq, as WorldCom’s restructuring announcement was met with scorn on Wall Street. The stock dived $4.81 to $18.94 in the third-heaviest trading ever for an individual U.S. stock. More than 195 million shares changed hands.

Other telecom shares sliding included AT&T;, down $1.19 to $22; Deutsche Telekom, down $1.94 to $36.25; Vodaphone, down $2.19 to $40.38; Qwest Communications, down $2.94 to $45.69; and JDS Uniphase, off $2.88 to $78.56.

* The semiconductor sector was hurt after Altera, the world’s No. 2 maker of programmable chips, said fourth-quarter sales will be on the low end of forecasts. The stock tumbled $8.38 to $32.56.

Other chip stocks sliding included Texas Instruments, down $2.31 to $46.75; Emulex, down $9.31 to $137.56; Xilinx, down $5 to $67.44; and International Rectifier, down $3 to $41.63.

* On the plus side, tech issues gaining included Yahoo, up $5.73 to $64.36; CMGI, up $3.81 to $20.69; Redback Networks, up $5.69 to $112.13; and EMC, up $1.94 to $91.

* Energy and utility stocks resurged as near-term crude oil futures in New York rose 55 cents to $33.25 a barrel. Fresh U.S. inventory data showed an unexpected drop in supplies last week.

Exxon Mobil jumped $2.88 to $92.06, Baker Hughes shot up $2.75 to $37.13 and Burlington Resources gained $2.38 to $38.38.

* Investors hunting for new stocks once again targeted doughnut retailer Krispy Kreme: It hit a record high of $105.75 during the session, finishing up $4 at $102.56.

Market Roundup: C10, C11