Resurgent Tech Issues Lead Solid Advance
Technology stocks stormed back Thursday from a five-day rout, pushing the Nasdaq composite index to its biggest one-day point gain ever and lifting the broad market as well.
The Nasdaq index, heavily weighted with tech shares, rocketed 96.05 points, or 4.2%, to 2,405.55. It was the ninth-biggest percentage gain ever.
The blue-chip Dow Jones industrials, boosted by IBM, soared 186.15 points, or 2%, to 9,363.46.
Both indexes closed at or near their highs for the day, as buying continued strong all the way to the closing bell.
Analysts said no single news event triggered the rally, but that several factors were at work:
* A sharp rebound in many Internet stocks after CMGI, a major investor in Net search engine Lycos, all but demanded a higher takeover price than what entertainment mogul Barry Diller offered Tuesday.
* Bargain-hunting after the Nasdaq index slid 8% from its record high reached on Feb. 1 to Wednesday. Some big tech stocks had fallen much more sharply. Cisco Systems, for example, had sunk 17% in that period. It rose 6.4% to $104.88 Thursday.
* Relief that the Senate impeachment trial of President Clinton is nearing an end.
* Another sharp drop in key commodity prices, including sugar, cotton and grains, amid a continuing global glut. Lower commodity prices mean lower raw material costs for many companies.
* Supportive words from Federal Reserve Chairman Alan Greenspan, who told the House Banking Committee that “we have an economy that is functioning exceptionally well.”
Greenspan offered no clue about the Fed’s intentions regarding interest rates. Fear has been rising in recent weeks that the Fed might want to slow the economy’s robust pace with tighter credit.
Those concerns have helped push Treasury bond yields up to three-month highs. Yields were flat or slightly higher on Thursday, as the government completed its quarterly “refunding,” or major sale of debt.
The Treasury auctioned $10 billion of new 30-year bonds at a yield of 5.298%, slightly below expectations. The yield on the previously issued 30-year bond ended at 5.36%, same as Wednesday.
Because of the government’s budget surplus, there won’t be another 30-year bond sale until August.
On Wall Street, despite the gains in the Dow and the Nasdaq index, analysts noted that the broad market wasn’t nearly as strong.
Winners topped losers by a 3-to-2 margin on the New York Stock Exchange and by about the same margin on Nasdaq. But 101 NYSE stocks still hit new lows, while only 19 hit new highs.
Volume was higher than on Wednesday but below recent peaks.
Traders said the buying remains concentrated in a select few big stocks--mainly tech issues.
“Until you can find another sector to take some leadership, I’m not convinced we’re going to run a heck of a lot higher from here,” said Elon Spar, trader at Credit Suisse First Boston.
Among Thursday’s highlights:
* Lycos, which plunged early this week after Barry Diller’s takeover offer disappointed investors, soared $16 to $103.25 on the CMGI news. CMGI rose $19.94 to $112.
That pulled up other Net shares, including EBay, up $27.50 to $239.50; Yahoo, up $16.13 to $158.50; Amazon.com, up $12.44 to $109.88; and Xoom.com, up $8.31 to $54.69.
* Among big techs, IBM zoomed $9.63 to $178.50, though it still remains below its recent peak of $199.31. Microsoft gained $2.13 to $162.75, Intel leaped $4.44 to $133.25 and Sun Microsystems soared $7.88 to $105.31.
* Shares of banking and financial services companies rose after Greenspan endorsed a bill that would make it easier for financial services companies to combine their businesses. Merrill Lynch rocketed $4.69 to $71.69, BankOne gained $2.56 to $50.81 and BankAmerica jumped $3.31 to $64.94.
* American International Group soared $7.75 to $106.50 after the insurance giant reported surprisingly strong fourth-quarter earnings.
* Biotech firm EntreMed, which plunged $11.63 to $12.88 on Wednesday after Bristol-Myers pulled its support for the company’s experimental anti-cancer compound, rebounded $12.81 to $25.69 after the U.S. National Cancer Institute said it succeeded in duplicating controversial experiments using the compound.
* Among Southland issues, retailer Wet Seal soared $5.31 to $40.25 on the heels of a bullish earnings projection by the company. But Ortel sank $2 to $7 after the fiber optic tech firm warned of a near-term loss.
In foreign trading, Mexico’s main stock index leaped 4.2% to 4,107.74 as the peso rose to a five-week high of 9.99 to the dollar. High interest rates and slowing inflation are attracting capital to Mexico, analysts said.
Market Roundup, C6
