Rally Shows Signs of Slowing; Yields Inch Up
A reinvigorated technology group drove stocks to further record highs Wednesday, but another uninspiring performance in the broad market suggested that Wall Street’s three-month rally is losing steam.
The Dow Jones industrial average edged above 9,200 for the first time, but quickly pulled back and finished down 8.22 points, or 0.1%, at 9,176.72.
While other indexes fared better than the Dow, analysts pointed out several areas of concern: Declining issues outnumbered advancers. The lack of progress came on huge share volume, a potential bearish sign that Wall Streeters refer to as “churning.” Finally, speculative Internet stocks jumped for the second day as investors rushed to cash in on the sector’s trading frenzy.
“The breadth doesn’t look particularly good and you have a lot of speculation,” said Peter Anderson, chief investment strategist at American Express Financial Advisors.
The technology-heavy Nasdaq composite index posted the best gain for the second day in a row as leading computer-related issues rallied in advance of a quarterly profit report from Microsoft. And the software giant didn’t disappoint. After the closing bell, Microsoft joined a chorus of computer industry bellwethers that have beaten Wall Street’s forecasts.
Microsoft rose $4 to $98.88. The stock was helped by federal appeals court judges who suggested they are receptive to Microsoft’s argument that the Windows operating system installed with its Internet browser is an integrated product.
Intel surged $5.13 to $84.06, and Dell Computer rose $3.06 to $77.44. But International Business Machines, which jumped nearly $7 on Tuesday after its profit report surpassed expectations, sank $3.25 to $114.75 on Wednesday.
“There’s a ripple of new luster in the technology sector, which has lagged the market over the last several weeks,” said A.C. Moore, chief investment strategist for Principal Financial Securities of Dallas.
The Nasdaq was up 13.74 points, or 0.7%, to 1,917.61. The Standard & Poor’s 500-stock list rose 3.87 points, or 0.3%, to 1,130.54. It was the fourth straight record close for both measures.
Bank shares, already red-hot from takeover speculation, got a boost from Bank of New York’s unsolicited $22.9-billion bid for Mellon Bank. Mellon gained $8.13 to $78, and Bank of New York lost $2 to $62.06. Bank of New York offered 1.4 shares for each Mellon share, valuing Mellon at $86.89 a share based on Wednesday’s closing price. But Mellon Chairman Frank Cahouet said the firm isn’t for sale.
Declining issues outnumbered advancers by 10 to 9 on the New York Stock Exchange, where volume totaled 696.7 million shares, exceeding Tuesday’s hefty 675.8 million. Decliners also led advancers on Nasdaq, which registered its second-highest volume of all time. More than 1 billion shares changed hands on Nasdaq, surpassed only by the 1.35 billion shares that were traded on Oct. 28, the day the market rebounded from its deep Oct. 27 sell-off.
Heavy volume with little or no price gains is a bearish sign. It indicates that there are investors willing to buy stocks. But they’re being met with an equal or larger number of sellers.
A day after a Federal Reserve Board governor warned of a possible interest-rate hike, the yield on the benchmark 30-year Treasury bond inched up to 5.96% from 5.95%.
Gold rose near a six-year high on signs that European central banks will back the euro, the new common currency, with more gold than originally expected. It closed at $313.60 an ounce, up $2.40. Among Wednesday’s highlights:
* For the second straight day, the list of big Nasdaq gainers was dominated by obscure companies with some type of Internet connection. Alpha Microsystems in Santa Ana surged to $6.19, up $3.38, as almost 21 million shares were traded. Track Data gained $6.81 to $9.31. Innodata leaped $1.59 to $3.13. Only Alpha Microsystems, which unveiled free software to help investors use the Internet, released any news.
