Dow Drops 113, Yields Soar on Interest Rate Concerns
The Dow Jones industrial average fell and bond yields rose on concern that Federal Reserve policymakers will signal an intention today to raise interest rates.
Speculation that the Fed will announce a bias toward higher rates and raise rates twice next year “could give us a 10% correction” in the major stock indexes, said Robert Bloom, chief investment officer for Friends, Ivory & Sime.
The benchmark 30-year Treasury yield soared to a 27-month high of 6.44%, from 6.38% on Friday.
The Dow fell 113.16 points, or 1%, to 11,144.27. The broader Standard & Poor’s 500 index dipped 2.96 points, or 0.2%, to 1,418.09, and the Nasdaq composite index rose 30.81 points, or 0.8%, to 3,783.87.
Nasdaq set its third straight record, the 55th of the year, as investors shoveled money into technology shares with robotic predictability. Nasdaq has risen 71% this year and 39% since Oct. 15.
Breadth was poor, as three stocks fell for every two that rose on the New York Stock Exchange.
Among the highlights:
* Tech stalwarts paced Nasdaq’s rally. Dell Computer rose $2.13 to $47.69, Cisco Systems gained $3.56 to $103.25, and Yahoo climbed $19.50 to $369.50, a 52-week high.
* Several companies got boosts from announcing stock splits.
Oracle rose $5.63 to $96.31 after saying it will split its shares 2-for-1 on Jan. 18 for holders of record Dec. 30. The stock is up 235% in 1999.
Others advancing, with ratios and dates of splits: Novellus Systems, up $28.38 to $113.56 (3-for-1, payable Jan. 15 for holders of record Dec. 30); Red Hat, up $15.06 to $267.94 (2-for-1, Jan. 7, Dec. 27); Portal Software, up $1 to $109.50 (2-for-1, Jan. 19, Dec. 31); and Morgan Stanley Dean Witter, up $2.25 to $130.31 (2-for-1, Jan. 26, Jan. 12). Linux computer system specialist Red Hat is up seventeenfold from its Aug. 11 initial offering.
Also setting splits: DoubleClick, down $3.56 to $201.38 (2-for-1, Jan. 10, Dec. 31); and Check Point Software Technologies, down $5.19 to $192.81 (2-for-1, Jan. 30, Jan. 23).
* InterVU rose $26.88 to $114.88 after Microsoft said it will invest $30 million in the company, which helps businesses broadcast video and audio over the Net.
* Digital Impact jumped $7 to $51.75 after CS First Boston and Donaldson Lufkin & Jenrette began coverage of the provider of Internet direct marketing services with “buy” ratings and U.S. Bancorp Piper Jaffray called it a “strong buy.”
* Juno Online Services surged $12.63 to $29 after saying it will offer “full” Net access free--for users who don’t mind constant advertising.
* Trouble continued in the insurance sector, as Progressive slumped $5.94 to $71.06 after warning it will have an underwriting loss in the fourth quarter, with earnings significantly below analyst estimates. The shares are down 58% this year. Progressive’s warning prompted PaineWebber to cut its 2000 earnings-per-share estimate to $3.30 a share from $4.10.
Also falling on a profit warning: Lason, which manages documents and records for businesses, sank $11.88 to $11.44 after saying fourth-quarter earnings could fall well short of estimates as customers delay purchases until the millennium date change.
Market Roundup, C11
