Wall St. Rebounds, but Will It Last?
Big-name technology stocks led the rebound in major stock market indexes Monday, but the day’s winners also included many of the “value” stocks that have been attracting new interest since early March.
Overall, most U.S. share indexes gained in heavy trading. Still, falling stocks outnumbered winners by about 3 to 2 on the New York Stock Exchange and by 26 to 17 on Nasdaq.
The Treasury bond market suffered through its worst day in 11 months, in part as investors raced back into equities, dumping bonds. The benchmark 30-year yield leaped to 5.92% from 5.78% Friday.
A rush back into tech giants paced the Nasdaq composite index’s 217.87-point, 6.6% jump to 3,539.16.
Apple Computer, Motorola and Rational Software were some of the top picks recommended Monday by David Brady, manager of the Stein Roe Young Investors fund.
Many other investors shared his enthusiasm: Apple surged $12 to $123.88, Motorola gained $7.50 to $116.50 and Rational jumped $10.38 to $68.50.
Other big tech gainers included Intel, up $12.50 to $123; Cisco Systems, up $9.50 to $66.50; Sun Microsystems, up $8.38 to $84.88; Hewlett-Packard, up $10.75 to $133.75; CMGI, up $12.94 to $65; and PMC-Sierra, up $40.81 to $159.25.
Still, many fund managers remain highly selective about tech stocks, which showed in the day’s action.
“Our managers were nervous about having so much money in cash, but their feeling is that the market is not going to go way up from here,” said Jim Atkinson, managing director of Investec Guinness Flight, a Pasadena-based mutual fund company.
Investec’s Wireless World fund bought some shares in Comverse Technology, a New York-based computer and telecommunications equipment firm that gained $2.44 to $76.38, and shares in semiconductor maker MIPS Technologies, which rose 56 cents to $27.94.
But the fund reduced its cash level--which was at 25% of the fund’s assets--by only 5% on Monday, figuring that a go-slow approach was the best way to invest in a still-tenuous environment.
“Most of the Internet sector is still too expensive, despite the sharp declines,” said Syl Marquardt, research director at John Hancock Funds in Boston. “But some of the more-established companies, such as Dell, IBM and Microsoft, are back down to prices that fall within their historic ranges. I would consider them to be very good buys.”
Those leaders all got a lift, with Dell up $1.13 to $48.75, IBM up $6.88 to $111.88 and Microsoft up $1.75 to $75.88.
Outside tech, investors flocked back to many household-product and other consumer stocks that began attracting more attention as tech shares began to sink in March.
Johnson & Johnson and Procter & Gamble, which had suffered in recent years, are also now selling at attractive prices, Marquardt said. J&J; added $4.19 to $77.50, P&G; jumped $6 to $69, Clorox climbed $4.75 to $40.63 and Colgate Palmolive rose $1.88 to $57.63.
Meanwhile, some value fund managers were beginning to feel vindicated as their style of investing gained some steam.
“A value manager is kind of like the girl next door,” said Karl Mills, vice chairman of Jurika & Voyles in Oakland. “There’s not the same sex appeal, but there’s a lot of virtue in these business models.”
Mills was buying shares in Hormel, the food-processing company that makes Spam; OM Group, which processes cobalt used in batteries; and First Data, which processes credit card transactions. Hormel added 56 cents to $16.44, OM Group eased 25 cents to $45.13 and First Data advanced $2.06 to $41.
Reynolds & Reynolds, a business-forms company that has transformed itself into a systems provider primarily for auto companies, was the top pick of Clyde McGregor, portfolio manager at the Oakmark Equity and Income Fund in Chicago. It rose $1.31 to $27.13.
“We look for businesses that are selling at a significant discount to what we consider their intrinsic value to be. We are still not able to develop an understanding of where the intrinsic value is in some of the technology companies,” he said.
McGregor is also a fan of Lear, a Michigan-based auto-parts supplier, and Nova, which processes credit card transactions. Lear rallied $1.31 to $27.63 and Nova rose 50 cents to $27.25.
Another auto parts maker, Johnson Controls, rose $4.19 to $60.81 on a strong earnings report.
Other highlights:
* Among Southern California’s tech winners, Vitesse Semiconductor rocketed $18.38 to $73.06, Broadcom soared $26.31 to $148.56 and Applied Micro Circuits raced $33.13 to $104.63. Vitesse reported earnings after the close.
* Brokerage analyst ratings gave several tech stocks a boost. Compaq Computer rallied $2.06 to $29.56 after BancBoston Robertson Stephens called it a “strong buy.” Micron Technology rocketed $17.94 to $114 after the PC memory chip maker told analysts that demand is picking up, and four of them reiterated “buy” ratings.
* Many unprofitable Internet companies continued to be pummeled, including NetZero, down $1.63 to $5.38; Agile Software, down $5.81 to $20.69; and 724 Solutions, down $9.88 to $45.25.
* Terayon Communication Systems tumbled $12.13 to $81.88 after a shareholder sued, accusing the company of making misleading statements about its modems that provide Internet access through cable-TV lines. The stock is 71% off its recent peak.
* Old-school companies that reported strong first-quarter earnings were rewarded, with Ely Lilly gaining $2.56 to $70 and Ford gaining $4.81 to $57.06.
Market Roundup, C12
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STOCK MARKET RECOVERY
“Black Monday” fails to materialize, but worries remain. A1
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Technology Giants Lead the Rebound . . .
How some major tech stocks fared Monday:
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. . . Lifting the Nasdaq 100 Index . . .
Daily closes for the Nasdaq 100 index, which includes the largest non-financial stocks on the Nasdaq market.
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Monday:
3,529.45, up 323.75
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. . . but Many Smaller Tech Shares Fall
Some of the tech issues that continued to decline Monday:
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Sources: Times research, Reuters
