NZ stocks: Market pulls back with Wall Street

12.00pm

The sharemarket pulled back today on negative news from Wall Street and bond markets.

There was also disappointment over the announcement today of the weighting allocated to New Zealand shares in the colossal New Zealand Super Fund.

The NZSX-50, which yesterday climbed to its highest in 30 months, was down 9.52 points at 2208.00 while the NZSX-40 capital index was down 8.42 at 2132.17 shortly after noon.

Market leader Telecom dominated business with nearly half of the total market turnover of $24 million. It was down 6c to 516.

The decision of NZSF guardians to only invest 22 per cent of its billions in New Zealand and only 7.5 per cent of the total in equities was disappointing to most local sharemarket professionals.

The fund, expected to build to over $100 billion in 20 years, was expected to provide hefty underpinning for the market over the next few years.

US stocks pulled back from the previous day's gains, as investors were spooked by a resurgence in bond yields that could choke off the economic recovery.

Investors fear rising interest rates could raise borrowing costs, crimping corporate profits and the rebound that stock investors were betting on.

The blue-chip Dow Jones industrial average declined 38.30 points, or 0.41 per cent, to 9,271.76; the broader Standard & Poor's 500 Index fell 6.32 points to 984.03 and the technology-dominated Nasdaq Composite Index dipped 0.42 of a point to 1,686.59.

ASB Securities broker Andrew Kelleher said that every time Telecom approached the 525-530c level sellers emerged. Until that level was breached, there was little hope for the NZSX-50 to stretch into a new band. Telecom comprises 28 per cent of the index.

Fletcher Building continued to push on after its well received result yesterday. It rose 3c to 425.

Other stocks which have had good runs recently were hit by profit taking. Auckland Airport fell 2c to 626, The Warehouse was down 9c at 521, Contact Energy was down 5c to 493 and Waste Management was down 5c at 385.

However, Fisher & Paykel Appliances went onwards and upwards with a 15c rise to 1450 and sister company F&P Healthcare rose 7c to 1230.

Sky City Leisure was up 4c to 160 after reversing last year's $20 million loss into a $3.4 million profit.

Mr Kelleher said it was hard to quantify how much of the market's rally had been in expectation of the Super Fund investing.

"The decision will be a little disappointing," he said.

But he added that it should not be underestimated how much of the rally was down to good results published by most companies in the current reporting round.

In the medium-term, the Super Fund decision was disappointing.

"Expectations tend swing towards the optimistic and it is fair to say this was at the lower end," Mr Kelleher said.

"We still know there is a larger underlying investor in the New Zealand equity market, and that has to be positive for the market."

There were 20 rises and 37 falls among the 112 stocks traded.

- NZPA