Yahoo Surges 24%, Propelling Nasdaq to Another High
The Nasdaq composite surged to its fourth straight record Tuesday as investors snapped up Yahoo before its inclusion in the Standard & Poor’s 500, but the Dow and other indexes lost ground.
Paced by Yahoo’s 24% leap, Nasdaq rose 40.91 points, or 1.1%, to 3,586.92. More than 1.6 billion shares changed hands, making it Nasdaq’s second-busiest day ever. The stock joined the S&P; index after the close of trading Tuesday.
The Dow Jones industrial average tumbled 118.36 points, or 1.1%, to 11,106.65, and the S&P; 500 slipped 14.16 points, or 1%, to 1,409.17.
“The Nasdaq is the only place that people are making money,” said Guy Truicko, a money manager with Unity Management in Garden City, N.Y.
Coca-Cola slid 9%, leading the S&P; 500’s decline as analysts cut their ratings on the company the day after it announced its chairman will step down.
“Without having a clear idea of the company’s direction, investors are taking a negative view of the management change,” said Henry Asher, president of Northstar Group.
Two stocks fell for every one that rose on the New York Stock Exchange, where more than 1 billion shares changed hands, the ninth-most ever on the Big Board.
But on the tech-heavy Nasdaq, Yahoo rocketed $67.19 to $348, an all-time high.
“Index managers will have to adjust portfolios to accommodate Yahoo, given its market cap and weight in the [S&P;] index,” said Silvio Lotufo, a strategist at Merrill Lynch.
With a market value of $92 billion, Yahoo has a far bigger weighting in the S&P; 500 than the company it replaced, $1.8-billion Laidlaw.
Yahoo’s 64% gain since the index announcement last week is unusually large. Stocks usually get a 5%-to-10% boost in the five days or so between when the S&P; committee announces an addition and the stock joins the index, according to research by Murali Ramaswami of Lehman Bros.
Coke fizzled $5.63 to $59 after getting downgrades Tuesday from Morgan Stanley Dean Witter and Donaldson Lufkin & Jenrette Securities, among others.
Nine analysts rate Coke a “buy,” and 10 call the stock a “hold”--Wall Street’s euphemism for “sell.” One analyst has an outright “sell” recommendation.
Bonds rallied for the third straight session after reports showed rising productivity and falling labor costs, suggesting the economy’s nine-year expansion may not be stoking much inflation. The benchmark 30-year Treasury yield fell to 6.20%, from 6.24% the day before.
In other markets, gold rose more than 2% on expectations that investors in Asia will stock up on the metal after recent declines. The euro and yen gained against the dollar.
Among stocks on the move:
* General Motors fell $4.88 to $72.63--a 6% drop, its biggest one-day decline in almost 12 years--as investors were disappointed that the world’s largest auto maker’s board didn’t announce any plan Monday to spin off its Hughes Electronics stake. Hughes, which trades under the ticker GMH, eased 69 cents to $94.
* Cygnus vaulted $8.75 to $18 after a Food and Drug Administration panel recommended that the agency approve the company’s watch-like monitor that allows diabetics to track their blood-sugar levels more frequently.
* Major drug stocks lost ground, with Johnson & Johnson down $3.44 to $93.38 and Merck down $2.44 to $73.19.
* AirNet Communications (ticker symbol: ANCC), which sells wireless telecommunications gear, nearly tripled on its first trading day, zipping $27.06 to $41.06.
In other debuts, Harris Interactive (HPOL), a market research and polling firm, rose $6.06 to $20.06, but HealthCentral.com (HCEN), which runs an informational and e-commerce Web site, plummeted $1.13 to $9.88. It’s rare for initial public offerings to fall right away.
* Among Southland stocks, Stamps.com zoomed $9.31 to $76.81. After the close, rival E-Stamp said it won two new patents.
Market Roundup, C12
