Internet Mania Returns; Broad Market Lags
Internet mania resurged on Wall Street on Tuesday as two major Net players announced a merger, but the broader stock market struggled amid a deluge of earnings reports.
Net stocks, and a rally in many big-name tech issues, helped push the Nasdaq composite index up 2.6% to a record 2,408.17.
The Dow industrials, meanwhile, added just 14.67 points to 9,355.22, though the blue-chip index recovered from a loss of 130 points.
In other trading, Brazilian stocks continued to rebound as the nation’s currency firmed in value, but key budget-related votes are pending in Brazil’s Congress, traders warned.
In the U.S. bond market, Treasury yields rose ahead of Federal Reserve Chairman Alan Greenspan’s testimony before Congress today.
On Wall Street, the tech and telecom sectors were red-hot again, boosted by the announced merger of Internet firms Excite and @Home, and by Vodaphone Group’s deal for AirTouch Communications.
The deals were reminders that “there are other publicly traded companies that could benefit from mergers. Alliances are becoming more important,” said Stephen Dalton, a growth-stock manager for First Capital Group.
The Interactive Week Internet stock index rose 4.5% for the day, while an American Stock Exchange index of 17 major telecom stocks rose 4.1%.
For companies reporting fourth-quarter earnings--including many financial firms--their stocks’ response was largely muted Tuesday.
But after the market closed, Microsoft provided another reminder of the fundamental appeal of tech stocks, as it reported results far above expectations.
“That will reinforce the trend of big, strong technology companies” as market leaders, said Ted Bridges, a money manager with Bridges Investment Counsel.
In commodity trading, sugar and coffee futures both plunged 8% on expectations that Brazil’s currency devaluation last week will lead to increased exports from the world’s biggest producer of both commodities, compounding surpluses.
Raw sugar posted its biggest one-day drop in more than three years, and coffee had its worst day since December 1997.
But even if Brazil’s woes drag commodity prices lower, they aren’t likely to do the same to U.S. Treasury bond yields--unlike the market turmoil of last fall, which triggered the Fed’s cut in rates.
Greenspan, testifying today on the economy, probably will downplay chances of additional Fed rate cuts, given the strong U.S. economy, experts say.
“I don’t think Greenspan can say anything that can help the market,” said Mitchell Stapley, who oversees $3 billion of bonds at Kent Funds in Grand Rapids, Mich.
Treasury yields rose Tuesday, with the 30-year bond yield ending at 5.14%, up from 5.11% on Friday.
In foreign trading, Brazil’s main share index gained 3.8%, Argentina’s rose 1.9%, but Mexico’s market lost 0.8%.
The Brazilian currency, the real, closed at 1.57 to the dollar, slightly stronger than the 1.59 level of Monday. Still, “it’s too early to say we’ve reached a comfortable level,” said one currency trader.
Money continued to flood out of Brazil, with an estimated $400 million leaving again Tuesday, adding to multibillion-dollar losses that last week overwhelmed Brazil’s attempts to defend the real and forced it to devalue.
Analysts said investors are waiting to see if the world’s ninth-largest economy can make good on promises to cut its monstrous budget deficit.
“There seems to be a lot of uncertainty right now while people wait to see what happens in Congress,” an equities trader at BancoCidade in Sao Paulo said.
Hopes that the government could quickly prove its firm support in Congress took a hit shortly after local markets closed, when whips decided to delay until today a hotly awaited vote on a motion to speed up a key pension reform bill.
The pension bill is one of the most controversial items in Brazil’s austerity package. One of its proposals--to levy pension contributions from retired civil servants--has been rejected four times.
Among Tuesday’s U.S. highlights:
* @Home’s purchase of Excite lifted @Home’s shares $13.38 to close at $115.38 and Excite $42.50 to $110, and boosted AT&T; $7.13 to $91.38. AT&T; is poised to become @Home’s largest shareholder.
Other Net winners included Yahoo, up $6 to $323, and Inktomi, up $9.50 to $158.
* Big-name techs advancing included Oracle, up $4.56 to $51.69, and IBM, up $7.31 to $192.25.
* In the telecom sector, the AirTouch deal helped lift other telecom shares, including MediaOne, up $2.50 to $54.75; Qualcomm, up $2.63 to $66.50; and GTE, up $5.38 to $67.88.
Market Roundup, C9
