FINANCIAL MARKETS : Blue Chips Droop, Tech Issues Sizzle : Wall Street: Dow sheds 21.83 while investors chase hot new shares; Treasury sells 10-year notes.
Key technology stocks zoomed back into the limelight on Wednesday, but perhaps at the expense of stodgier blue-chip issues.
Strong demand for shares of Microsoft--and a spectacular new stock offering from software up-and-comer Netscape Communications--lifted the Nasdaq market of mostly smaller stocks, while the Dow industrial average dipped 21.83 points to 4,671.49.
The Nasdaq composite index, in contrast, jumped 7.98 points to 1,005.10, nearing its recent all-time high of 1,010.66.
In addition to fresh buying of computer-related issues, biotechnology stocks also surged, further stoking the Nasdaq market’s gains.
Rising stocks outnumbered losers by 19 to 15 on Nasdaq, while losers had a slight edge on the New York Stock Exchange.
While the market’s split performance disappointed some analysts--and caused others to warn that the bull market may be entering a classic period of extreme speculation focused on smaller stocks--some experts said the continued appetite for technology shares is rational.
Arnold Owen, managing director of trading at SoundView Financial Corp., is steadfastly bullish about computer-related stocks.
“We are in a secular bull market in technology, and it’s not anywhere near the mature stages,” Owen said. “Microsoft is a market leader, a technology sector leader. I think the market has a difficult time rallying without Microsoft, and when I see the general market down and Microsoft up, I think the rest of the market cannot be far behind.”
Microsoft gained 3 to 96 1/2 Wednesday after the Justice Department said it would not pursue an antitrust action against the software company before the Aug. 24 debut of its hotly anticipated Windows 95 operating system.
Steven Goldman, market strategist at Weeden & Co. in Greenwich, Conn., said the introduction of Windows 95 has put a floor under computer stock prices this season, leaving “no sign of exhaustion” in that area of the market despite some recent profit-taking.
One sign of investors’ ongoing fascination with technology: Shares of Netscape Communications, which makes software for browsing on-line computer services, rocketed from 28 to as high as 74 3/4 in its public debut on Wednesday, before closing at 58 1/4 in wild Nasdaq trading.
In the broad market, stock investors seemed nonplussed by the Federal Reserve Board’s “beige book” report on the economy, which said most regions of the country slowed markedly at mid-year--hardly a surprise.
Like blue-chip stocks, the bond market had a relatively dull day.
Yields closed modestly higher despite what traders described as a decent reception for the $13 billion in 10-year notes auctioned by the Treasury.
The average yield on the 10-year notes was 6.50%. “It was a good auction,” said Kathleen Stephansen, senior economist at Donaldson, Lufkin & Jenrette Securities Corp.
Traders said there was buying by Japanese investors--whose government last week took steps to encourage more foreign investment by Japanese institutions--but demand still wasn’t strong enough to rally the bond market.
The Treasury will sell new 30-year bonds today. On Wednesday the yield on existing 30-year issues inched up to 6.92% from 6.88% on Tuesday.
Among Wednesday’s market highlights:
* Tech shares rising with Microsoft included Intel, up 1 3/8 to 66 1/8; Compaq, up 1 7/8 to 52; Sun Microsystems, up 1 3/8 to 46 7/8; Micron Technology, up 4 1/8 to 63 1/8; Seagate, up 1 1/2 to 44; and Applied Materials, up 2 3/4 to 100 1/4.
* Other tech-related stocks gaining included America Online, up 2 3/8 to 60; Broderbund, up 1 3/4 to 73 1/4; and Qualcomm, up 2 1/8 to 45 7/8.
* Biotech stocks were led higher by Chiron, which soared 10 5/8 to 88 1/4 after reporting quarterly earnings above expectations, though they amounted to just 2 cents a share.
Investors have been flocking back to biotech stocks recently on optimism about new products and treatments.
Other gainers included Amgen, up 2 5/8 to 90 1/4; Biogen, up 3 1/4 to 50 1/2; Genzyme, up 3 1/8 to 60 1/8; Agouron, up 1 3/4 to 29 1/2; Cephalon, up 2 1/8 to 29 3/8; and Somatogen, which soared 5 5/8 to 25 5/8.
* The biotech rally may have lifted shares of big drug companies as well. Warner Lambert gained 1 5/8 to 86 3/8, Pfizer added 3/4 to 50 1/8 and Merck was up 7/8 to 51 1/8.
* On the down side, industrial stocks were broadly lower, perhaps as some investors sold those shares to buy smaller stocks.
Alcoa lost 3/4 to 56 3/4, Caterpillar fell 1 1/8 to 65, Goodrich dropped 7/8 to 55 1/8 and Air Products & Chemicals gave up 2 1/2 to 53 1/8.
* Philip Morris sank 1 3/8 to 73 1/2 on fears of tighter federal regulation of tobacco products.
In commodities trading, orange juice futures fell sharply Wednesday as worries about supplies eased, while profit taking drove coffee, oil and wheat prices lower.
September frozen concentrated orange juice futures fell 3.50 cents a pound to 97 cents on the New York Cotton Exchange as speculators who had been buyers sold heavily.
“The longs [buyers] are exiting left and right,” Smith Barney analyst Walter Spilka said. “This is the seventh session in a row of lower prices in the September contract.”
Spilka said while the market may be looking ahead to a larger crop in the United States and a good crop in Brazil, current stocks were still tight and might lend some support.
In foreign stock markets, major bourses were slightly lower on the day.
Market Roundup, D6
