Computer and Cable Shares Rally as Dow Loses Ground
Stock prices ended narrowly mixed Friday in a session marked by profit-taking following Wall Street’s three-day rally.
AT&T;’s bold bid for cable operator MediaOne sent the phone company’s stock tumbling and broke a three-day winning streak in the Dow Jones industrials. But computer shares rallied for a fourth day on profit optimism.
The Dow dropped 37.51 points, or 0.4%, to 10,689.67.
The broader Standard & Poor’s 500 index dipped 1.97 points, or 0.1%, to 1,356.85. The Nasdaq composite index, heavily weighted in technology shares, climbed 29.08 points, or 1.1%, to 2,590.69, punctuating a powerful four-day rally.
Fifteen stocks rose for every 14 that fell on the New York Stock Exchange. Volume was modest.
The rally in computer shares followed a rout Monday that sent the Nasdaq to its third-biggest percentage drop this decade. The index rose 10% in the last four days.
IBM gained $5.25 to $199.75, Cisco Systems rose $4.19 to $117.38 and Microsoft climbed $1.06 to $86.
3Com soared $3.50 to $25.81 amid speculation that the No. 2 networking company may sell some of its less profitable businesses or be acquired by a large phone-equipment maker.
For the week, the Dow average rose 1.9%, the S&P; 500 gained 2.9% and the Nasdaq jumped 4.3%. The week’s NYSE volume was 4.78 billion, a record high.
MediaOne rose $7.88 to $77.38, pulling up other cable companies with it, after receiving a $58-billion takeover offer from AT&T.; Adelphia Communications rose $2.50 to $63.75 and @Home, which sells Internet services over the cable television network, rose $13.06 to $158.50. Cox Communications, which agreed to buy Media General’s cable systems for $1.4 billion in cash, rose $1.25 to $73.75.
“You’ll continue to see consolidation in communications suppliers--quite a few over the next year,” said Michael Manns of American Express Asset Management in Minneapolis.
AT&T;’s offer, which topped an earlier bid from Comcast, “is going to hike the valuation on other cable companies as well,” said Tom Marsico, who owns almost 5 million MediaOne shares and heads Marsico Capital Management in Denver.
AT&T; slumped $3.38 to $53.38. Last month, AT&T; bought Tele-Communications Inc., the No. 2 U.S. cable provider, for $59.4 billion.
The MediaOne bid “is a big bite” for AT&T;, said Tom Hudson, manager of Lord Abbett Affiliated Fund. The acquisition could cut AT&T;’s earnings by an estimated 30 cents a share in the first year after completion.
Bond yields were little changed.
Among the day’s other highlights:
* Merck fell $2.13 to $75.75 after reporting that first-quarter profit met analysts’ expectations. Some investors may have been hoping for more, said David Rolfe, chief investment officer at Wedgewood Partners.
* Priceline.com rose $11.63 to $88 after Goldman Sachs analysts Michael Parekh and Rakesh Sood added it to the firm’s recommended list and said the stock could reach $120 in six to 12 months. The company, which runs a Web site where consumers bid on airline tickets and hotel rooms, has a “unique patented business method,” the analysts said.
* Verisign fell $15.63 to $131.06, after the maker of security software for online transactions was downgraded to “neutral” from “outperform” by analyst Mary Meeker at Morgan Stanley Dean Witter. The stock has risen further than justified, Meeker said.
* Chock Full O’ Nuts rose $3.13 to $9.50 after the company rejected a bid by Sara Lee to buy the coffee maker for $10.50 a share, a 65% premium over Chock Full O’ Nuts’ closing share price Thursday.
Market Roundup, C4
