Stocks Mixed as Techs Fall; Dollar Tumbles
Stocks ended a lackluster session with mixed results Monday as investors stepped back from Friday’s rally in technology shares.
Meanwhile, the dollar slumped to a new three-year low against the yen. In commodity trading, oil prices continued to rocket.
On Wall Street the Dow industrials ended with a mere 1.90-point gain to 11,030.33. But the Nasdaq composite dived 1.5% to 2,844.77 as profit taking clipped many tech shares--despite news of a potential merger between Motorola and General Instrument.
In the broad market losers topped winners by 3 to 2 on the New York Stock Exchange and by 21 to 16 on Nasdaq.
Internet stocks, many of which have rallied sharply in recent weeks, saw the steepest declines Monday, as Yahoo dived $9.75 to $160.75 and EBay dropped $10.06 to $147.94.
Also, America Online skidded $6.19 to $90.13. Traders attributed the drop to an article in Barron’s magazine in which a short-seller--an investor who bets that the price of a stock will fall--said AOL’s stock could be cut in half as a result of price competition from other Internet service providers.
In currency markets, the yen again grabbed center-stage, rising to a three-year high against the dollar and its strongest level yet against the euro on expectations investors will shift more funds into Japan in a bet an economic rebound will boost stocks there.
The dollar ended at 106.44 yen, down 2.37 yen from Friday.
The yen’s strength came despite speculation that Japan will once again sell yen to damp its strength. Traders have shrugged off all Japan’s attempts to weaken the yen since early June, and did so again Monday, boosting the Japanese currency above the level where Japan stepped in on Friday.
But once again, the dollar’s weakness failed to upset the bond market much. The yield on the 30-year Treasury bond edged up just to 6.05% from 6.03% Friday.
A weaker dollar could raise import prices and fuel inflation.
Likewise, the continuing surge in oil prices threatens more inflation.
Crude oil futures rose above $24 a barrel Monday for the first time in 2 1/2 years on expectations that an annual increase in heating demand will come with U.S. supplies unusually low.
Crude oil for October delivery rose 66 cents to $24.21 a barrel on the New York Mercantile Exchange, the highest closing price since February 1997.
Oil ministers from Saudi Arabia, Iran and Algeria on Monday said production cuts should stay in place until the end of March.
The ministers, Saudi Arabia’s Ali Al-Naimi, Iran’s Bijan Namdar Zanganeh and Algeria’s Youcef Yousfi, met in Jeddah, Saudi Arabia, to discuss oil policies before the Sept. 22 conference of the Organization of Petroleum Exporting Countries in Vienna.
With inflation concerns rising, the Federal Reserve “continues to have justification for higher [interest] rates,” said A.C. Moore, investment strategist for Dunvegan Associates in Santa Barbara. “If the Fed sticks to its historic role of being preemptive of inflationary trends, it has enough evidence to continue tightening.”
But neither the bond market nor the stock market seems too fazed by the dollar or oil just yet.
Among Monday’s highlights:
* Motorola dropped $8.38 to $90.38 on reports that it was in talks to acquire General Instrument for more than $9.5 billion in stock.
Shares of General Instrument, which makes television-set-top boxes and high-speed modems for the cable industry, fell $2.19 to $49.69. But rival Scientific Atlanta jumped $2.63 to $58.31.
* In the Net sector, CMGI lost $5.63 to $84.25 and Go2Net sank $3.06 to $66.94.
But TheStreet.com rallied $5.94 to $25.69 as the online provider of business news said it will expand its distribution to Britain.
* International Paper climbed $2.50 to $53.81, continuing a recent wave of strength in paper stocks.
David Oskin, executive vice president of the International Paper, said he expects sales to Asian customers will return to their levels of early 1997 by the beginning of next year.
Also in the industrial sector, some chemical issues rallied. DuPont rose $2.75 to $68.50 and Dow Chemical jumped $3.25 to $116.38.
* Energy stocks pulled back despite the latest jump in crude prices. Exxon lost $1.81 to $78.63 and BP Amoco was off $1.44 to $114.44.
* Incyte Pharmaceuticals tumbled $14.13 to $27.25 after Warburg Dillon Read downgraded the stock to “buy” from “strong buy” after the U.S. Patent Office issued a ruling in favor of Affymetrix in a patent dispute with Incyte. Affymetrix surged $19.94 to $121.06.
Overseas, Japan’s Nikkei stock average rose 1.1%. European indexes were mostly lower.
Market Roundup, C14
