Markets Surge, With Risky Issues the Name of the Game
Look who’s back.
Wall Street’s big risk takers appear to be returning in droves, just days after one of the wildest intraday market swings in history.
A surge in some of the market’s most speculative names--including biotech shares and smaller Internet-related issues--fueled the Nasdaq composite index to a gain of 98.34 points, or 2.4%, to 4,267.56 on Thursday.
Small-stock indexes, including the Russell 2,000 and the Standard & Poor’s 600 index, scored even bigger percentage gains, as rising stocks swamped losers by nearly 2 to 1 on Nasdaq.
The broad market also gained for a second day, with the Dow Jones industrial average rising 80.35 points, or 0.7%, to 11,114.27.
Stocks had plunged early Tuesday, culminating weeks of sliding prices for many of the technology stocks that had led the market in January and February. At its low Tuesday, the Nasdaq composite was down a stunning 13.6% for the day--before the selling finally exhausted itself and bargain hunters jumped back in.
After tumbling 7.6% on Monday, the index closed Tuesday with a net loss of 1.8%, recovering most of its morning slump. On Wednesday Nasdaq inched up 0.5%, after surrendering much of a midday rally.
Thursday’s action demonstrated rebounding confidence on the part of technology stock owners who may have been badly burned in the sector’s recent decline, analysts said.
In particular, there was a renewed frenzy for biotech shares, especially those tied to mapping of the human gene sequence.
Most of those stocks rocketed Thursday after Celera Genomics said it had finished the first step in sequencing the genes of one person.
Celera shares soared $28 to $143, a 24% gain, and led the entire sector higher.
“It’s adding fuel to the fire. . . . Investors were ready and willing to return to these stocks,” said Eric Schmidt, analyst with SG Cowen Securities in New York.
Other big gainers in the group included Sequenom, up $8.81 to $42.31; Millennium Pharmaceuticals, up $30.26 to $173.63; and Myriad Genetics, up $20.06 to $74.
Many highly speculative Internet-related shares also rebounded Thursday, led by QXL.com, a British online auctioneer.
The company’s Nasdaq shares zoomed $29.67 to $51.98 after at least one brokerage rated it a “strong buy.” That lifted the shares close to their recent split-adjusted peak of $59.63.
“What this tells me is there is a lot of greed out there,” said a senior analyst at one London brokerage.
Among U.S. Internet stocks, many recent favorites that still were selling at high price-to-earnings ratios even after their March slides came roaring back Thursday, including Network Solutions, up $23.69 to $164.63; Juniper Networks, up $22.50 to $241.25; and Tibco Software, up $5.63 to $80.63.
Some market pros said the rebound in many “momentum” tech stocks that had led the market in January and February merely showed that investors continue to crave the excitement of new technology.
Rumors of momentum investing’s death, it appears, have been exaggerated.
What’s more, a February sales report from the semiconductor industry Thursday reminded Wall Street of the tech industry’s overall strong growth potential.
Worldwide chip sales jumped 33% in February from a year ago.
That set off a fresh rally in many major chip stocks, including Vitesse Semiconductor, up $2.88 to $88; Cypress Semiconductor, up $5.94 to $52; National Semiconductor, up $6.44 to $64.56; and Advanced Micro Devices, up $2.63 to $71.
Still, many investors probably remain cautious, and for good reason, some analysts said.
“It feels a little like an earthquake,” said Bill Schneider, head of block trading at Warburg Dillon Read. “You’re not sure if there are any more aftershocks coming, so you tread cautiously for a while.”
Schneider said many buyers were still focusing on shares of established companies whose strong growth outlooks justify their higher prices.
Sun Microsystems rose $3.94 to $92.69, Compaq gained $1.38 to $29.25, Hewlett-Packard surged $6.13 to $148.13, and Oracle rose $3.94 to $82.19.
“After some turmoil, the first place people with cash go is to the stocks they’re most comfortable with,” he said. “They build positions they already have or buy stocks they fully understand.”
Yet Yahoo--one of the few truly profitable Net companies--slid $11.56 to $154, despite its strong earnings report Wednesday. Traders said there was disappointment the company’s earnings weren’t higher.
Among Thursday’s highlights:
* Biotech stocks up sharply included Amgen, up $2.69 to $62.31; Genentech, up $7 to $156; Cephalon, up $6.56 to $45.50; and Regeneron, up $4.81 to $26.38.
But Human Genome Sciences inched up just $4 to $101.
* As biotech rebounded, major drug stocks pulled back. They had been rising in recent weeks as some investors fled biotech.
Merck fell $2.69 to $65.56, and Bristol Myers fell $3.94 to $60.50.
* In the tech sector, the day’s winners included Macromedia, up $7.69 to $76.81; Adobe Systems, up $7.44 to $114.63; and ISS Group, up $6.13 to $101.13.
Sawtek jumped $9.63 to $56.13. The maker of wireless-telecom equipment said it expects second-quarter net income of about 29 cents a share, above the 24-cent average forecast by analysts polled by First Call.
On the downside, Lycos lost $3.31 to $59.69, and Qualcomm slipped $2.13 to $139.13.
* Energy stocks gained after Goldman Sachs & Co. raised its forecast for Brent crude oil prices in London this year by 39%, a sign of confidence that exporters will succeed in keeping prices high as they pump more oil.
Exxon Mobil rose $2 to $81.75, Anadarko Petroleum rose $1.75 to $36.56, and Chevron gained $1.44 to $88.94.
* Entertainment stocks turned hot again. CBS surged $3.88 to $60.19, Viacom class A gained $3.56 to $55.94, and Univision rose $2 to $109.88.
Day’s Winners, Losers, C7-C8
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‘Momentum’ Stocks Revive
Many of the “momentum” stocks that had led the market higher in January and February before tumbling in recent weeks have resurged in recent days.
A sampling:
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Tues. intraday Thursday Pctg. gain Stock low close change from Tues. low QXL.com $20.00 $51.98 +$29.67 +160% Celera Genomics 57.00 143.00 +28.00 +151 Emulex 54.00 108.63 +14.63 +102 Abgenix 103.64 189.00 +40.95 +82 Tibco Software 45.31 80.63 +5.63 +78 Network Solutions 103.00 164.63 +23.69 +60 PMC-Sierra 116.00 185.00 +14.19 +59 Redback Networks 99.00 148.50 +27.50 +50 JDS Uniphase 82.00 111.50 +1.25 +36 Pegasus Commun. 117.00 140.63 +6.63 +20 Nasdaq composite 3,649 4,267.56 +98.34 +17
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Source: Bloomberg News
