Dow Rises Out of Rut; Tech Stocks End Mixed
Blue-chip shares snapped a five-session losing streak Monday with a strong rally, while battered technology issues lured bargain hunters after another dive.
The Dow Jones industrials finished up 84.29 points, or 1.1%, at 7,922.59, after falling 3.8% last week on worries about Asia’s financial turmoil.
The Nasdaq composite index, heavy with tech issues, slipped a barely perceptible 0.02 point to 1,536.56.
But that belied the day’s action, which saw the index fall as low as 1,515, a 1.4% decline from Friday’s close, as more brokerage analysts downgraded tech issues.
The Nasdaq index sank 6% last week.
Overall, smaller stocks in general were still under pressure Monday, as losers outnumbered winners 2,500 to 1,731 on Nasdaq, while winners had a 1,604-to-1,375 edge on the New York Stock Exchange.
Some analysts said Wall Street may have reevaluated its view of the severity of Asia’s side effects.
“Portfolio managers are beginning to see how to navigate the Asian crisis,” said J. Thomas Madden, chief investment officer at Federated Investors in Pittsburgh, which oversees $90 billion.
It also helped that South Korea’s currency and stock market rebounded Monday from last week’s devastating selling. (Story, D1.)
U.S. economic data suggested Monday that the domestic economy remains strong, and that will clearly be the greater determinant of earnings in the near term for most firms, analysts said.
“While the Pacific is soft, it’s not soft enough to offset strength in the domestic environment,” said Jeffrey Long, an analyst at J.P. Morgan Securities.
The economic news, however, helped push up U.S. interest rates ahead of today’s meeting of the Federal Reserve Board.
After hitting a four-year low of 5.92% on Friday, the yield on the bellwether 30-year Treasury bond rose to 5.97% on Monday.
Shorter-term yields also rose. Analysts said year-end book-squaring by some major companies helped contribute to a jump in the federal funds rate, the overnight loan rate among banks, to 6.25% from the Fed’s intended rate of 5.5%. The spike is viewed as largely technical, and it isn’t expected to last.
Among Monday’s highlights:
* Tech stocks slid at the outset after some Wall Street investment firms slashed earnings estimates and projected growth rates for personal computer companies and other makers of high-tech gear due to the economic problems in Asia, a key source of demand and supply for high-tech equipment.
SoundView, a boutique investment firm that specializes in technology stocks, cut its estimate for growth in PC unit sales in 1998 to 18.1% from 21%.
That hurt stocks such as Compaq, which fell $1.81 to $54.50. Even so, Compaq closed above its low for the day of $52.
Other tech issues falling included Dell, down $4.81 to $83.44; and Gateway 2000, down $1.50 to $29.13.
But Intel gained $1.63 to $72.13, IBM added 50 cents to $100.88, Applied Materials jumped $1.94 to $28.06, Motorola surged $2.06 to $57.94 and Computer Sciences gained $2.06 to $77.56.
* Chip maker Micron Technology ended unchanged at $22.50. But after the market closed it reported quarterly earnings far below expectations.
* Blue chips leading the Dow higher included American Express, up $1.94 to $88.56; GE, up $2.38 to $74.63; and Disney, up $3.50 to $97.13.
* Financial stocks were strong. Citicorp surged $5.31 to $132.13 and BankAmerica gained $1.63 to $77.25.
In currency trading, the dollar rose to a fresh 5 1/2-year high against the Japanese yen after a report from Japan’s central bank underscored deterioration in the business climate.
The dollar closed at 130.68 yen in New York, up from 130.45 late Friday. It also rose to 1.7765 German marks from 1.7745.
