Techs Lead Nasdaq Index to Another High as Dow Slides

Stocks diverged in familiar fashion Monday, with technology shares leading the Nasdaq composite index to another record while blue-chip industrials slumped.

Meanwhile, bond yields rose again ahead of the Treasury’s auctions this week. Gold pulled back after Friday’s surge.

The Nasdaq composite rose 77.63 points, or 1.8%, to 4,321.77, coasting past its previous record of 4,244.14 set Friday.

But the Dow Jones industrial average fell 58.01 points, or 0.5%, to 10,905.79. General Electric led the decline, slipping $5.06 to $136.50.

The Nasdaq index now has risen 6.2% so far this year, whereas the Dow has fallen 5.1%.

Gary Campbell, chief investment officer at Commerce Funds in St. Louis, said fears that interest rates will rise sharply this year are weighing heavily on investors’ minds, pressuring the vast majority of stocks. Indeed, losers topped winners by nearly 3 to 2 on the New York Stock Exchange on Monday.

But on Nasdaq, winners had a modest edge. For many investors, interest-rate concerns simply don’t register with regard to fast-growing tech companies.

“People are assuming that if the economy slows [because of higher rates], the only place they will get sustained growth” is in computer-related shares, said David Mead, chief investment officer for Harris Bank in Chicago.

But as tech shares go higher, their valuations--price relative to earnings, for example--stretch further. Cisco Systems, which rose $4.06 to a record $125.19 on Monday, now is priced at 202 times its most recent four quarters’ earnings per share.

Other tech gainers included Intel, up $3.19 to $107.94; Hewlett-Packard, up $10.50 to $128.50; and Agilent, up $3.25 to $79.50.

Biotech shares also were hot. Amgen rose $4.56 to $69.19, and Gilead Sciences surged $7.56 to $54.31.

“Many stocks have reached very, very high valuations, and rising interest rates are going to make many investors wonder if they’re worth their high prices,” Campbell said.

In the Treasury bond market, yields were buffeted in advance of the government’s sale this week of $32 billion of five-, 10- and 30-year securities. The sale begins with five-year T-notes today.

Yields rose across the board Monday--even though last week the 30-year T-bond yield tumbled, in part reflecting worries that there won’t be enough bonds to meet demand this year. The T-bond ended at 6.34%, up from 6.25% on Friday.

In commodity futures trading, gold slid $8.50 to $301.90 an ounce after rocketing $23.20 on Friday.

Gold soared Friday after Canada’s Placer Dome, the world’s fifth-largest miner, said it was suspending “forward” sales of gold at current prices because it expected higher prices sooner than later. The news raised speculation that other mining firms would make the same pledge, cutting supply.

But Barrick Gold on Monday, contrary to what traders had expected, failed to follow Placer Dome’s move.

In currency markets the dollar jumped to 108.78 yen from 107.35 Friday, on new fears that Japan is slipping back into recession.

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Market Roundup, C14