Intel News Sends Stocks on Wild Ride
Frenzied selling gave way to bargain hunting Friday, boosting some stock measures to record highs after an early tumble set off by a profit warning from chip maker Intel.
The Dow Jones industrial average finished nearly unchanged, rising 0.86 point to 7,331.04, after swinging from an 88-point loss to a 41-point gain.
But the most amazing turnaround came in the technology-heavy Nasdaq market, which finished slightly lower at 1,400.32 after tumbling nearly 50 points, or about 3.5%, at the open.
A rebound of that magnitude would be akin to the Dow industrials’ erasing a 250-point crash.
“The lesson of ‘buy on the dips’ has been learned in the last few years,” said David Katz, chief investment officer at Matrix Asset Management. “If you liked the company before and it’s off a few points, you should step in and buy it.”
Broad-market indicators also recovered from early slides. The New York Stock Exchange composite index closed at a new high of 441.78, and the Russell 2,000 list of smaller companies set its sixth straight record, closing at 380.76.
“It’s obvious we had some money lurking out there dying to be invested,” said Bill Meehan, a market analyst at Prudential Securities. He noted that a strong bond market and some reassuring comments from Compaq Computer about earnings and sales gave investors enough confidence to view the drop as a buying opportunity.
Compaq rallied back from a 4-point deficit, rising 6 3/8 to 108 1/8 on the day. Meanwhile, rival Dell Computer swung from a nearly 11-point deficit to a gain of 2 7/8, closing at 113 1/4.
One analyst warned that the stock market has so much good news built into it that some earnings disappointments can be expected to have a disproportionate effect.
“We’ve had such a run. Over time, the market has to pause because the backdrop is that the economy is slowing. The incredible gains have to be tempered,” said Chris Dickerson, analyst at Global Market Strategists Inc.
Bond investors’ inflation fears were calmed by news of a drop in new-home sales last month and a slight decline in manufacturing activity in the Chicago area. The yield of the Treasury’s benchmark 30-year bond fell to 6.90% from 6.97% late Thursday. A slowing economy is good news for bond investors because it would help keep a lid on inflation and could mean there’s no need for the Federal Reserve Board to raise interest rates to cool things down.
Investors will be focusing on the May employment report to be released next Friday. Although the report is expected to be strong and to move the market if it is, investors were a bit reassured Friday by some revisions in seasonal figures that will be used in compiling the employment report.
The changes announced by the Bureau of Labor Statistics could result in the payroll number being revised downward by 125,000, said Stephanie Davis, an analyst at Technical Data in Boston. Analysts said such a revision would make it less likely that the report would provide a reason for the Fed to raise rates in July.
Among market highlights:
* The brightened outlook for interest rates sent bank and financial stocks soaring. Citicorp rose 4 1/4 to 114 3/8, J.P. Morgan added 3 1/8 to 107 1/2 and Morgan Stanley advanced 2 1/2 to 67 1/2.
* Bristol-Myers rose 1 1/2 to 73 3/8, and Johnson & Johnson gained 1 1/8 to 60.
* Microsoft, which supplies software to almost every computer running on Intel chips, fell 1 7/8 to 124.
Coffee prices plummeted as profit taking by nervous speculators ahead of the weekend took some of the air out of the most spectacular bubble in the coffee market in two decades.
At the Coffee, Sugar and Cocoa Exchange in New York, coffee for July delivery fell 38.40 cents a pound to close at 276.40, a decline of 12% in one day.
Selling of futures by speculators to cash in profits from a three-day rally this week accelerated late in the day. But the July coffee contract still posted a net gain of 20 cents a pound for the week, and coffee prices remain at the highest levels since June 1977.
Market Roundup, D4
