Nasdaq Up 3.8% to a New High as Blue Chips Slide
The Nasdaq composite index soared 3.8% to a record high Wednesday as technology investors poured back into their favorite stocks--apparently convinced that the Federal Reserve isn’t drawing a bead on them.
But the stock market overall finished mixed, with many blue chips sliding, after Fed Chairman Alan Greenspan again warned Wall Street to expect some additional interest rate increases.
A key issue, of course, is how many more increases. At least among technology investors, the feeling Wednesday was that Greenspan isn’t planning to raise rates sharply enough to halt those stocks’ phenomenal rally.
The Nasdaq index leaped 168.21 points, or 3.8%, to a new high of 4,550.33. It was the largest point gain ever for the index, though the percentage gain didn’t rank among the top 10 historically.
“People feel much more confident in buying some of the highfliers” again, said Michael Manns, a senior portfolio manager who helps oversee $13 billion at American Express Financial Advisors in Minneapolis.
The optimism didn’t extend to many industrial and consumer products blue chips, however: The Dow Jones industrial average lost 79.11 points, or 0.8%, to 10,225.73. Losers outnumbered winners by 3 to 2 on the New York Stock Exchange.
In the bond market, yields rose modestly after sliding in recent sessions. The 30-year Treasury bond yield inched up to 6.12% from 6.08% on Tuesday.
The Treasury sold $12 billion worth of new two-year notes at a yield of 6.59%.
Greenspan, while warning once again that the economy appears to be growing at a rate that threatens to boost inflation, insisted that “the optimum monetary policy, if it is feasible, is to move incrementally”--suggesting that the Fed will continue its gradualist approach to raising interest rates.
The central bank has raised rates four times since June, each time boosting its key short-term rate by a quarter point, to 5.75% currently.
Greenspan’s comments were sufficiently soothing to send the already-rallying tech-stock sector far higher. More than half the Nasdaq’s gain came after Greenspan insisted that the Fed, in raising interest rates, isn’t specifically targeting the stock market.
Nasdaq’s gain was the 10th time this year the index has moved more than 3% in a day. That’s more swings of that size than during the first eight years the Nasdaq existed.
The index’s average daily move this year has been 2.2%, compared with 1.4% in 1999, 1.2% in 1998 and 0.6% for 1971 through 1986.
Money “is flowing into the names that have had momentum in the last six months,” said Philip Schettewi, head of Prudential Global Asset Management’s $100 billion in stock investments. “People want technology and they want biotechnology.”
“The total craze for technology stocks has gripped this market and that situation remains in control,” said Ricky Harrington, senior vice president at Wachovia Securities in Charlotte, N.C.
Wednesday also marked the 12th time in this year’s 36 trading days that a Nasdaq gain has been coupled with a decline in the Dow. The Nasdaq has advanced 11.8% year-to-date, while the Dow average has dropped 11.1%.
Analysts say investors continue to sell many “old economy” stocks to buy “new economy” tech and telecom names, despite the new-economy stocks’ sky-high valuations.
Among Wednesday’s highlights:
* Major tech gainers included Intel, up $2.31 to $109.06; Sun Microsystems, up $6.63 to $94.63; Gateway, up $10.56 to $67.75; and Cisco Systems, up $14.69 to a record $138.63.
But IBM fell $2.25 to $108.75.
* In the Internet arena, EBay soared $20.44 to $154.94, Yahoo jumped $12.39 to $166.20, Amazon.com gained $6.88 to $70.44, EarthLink rebounded $4.13 to $25.88 and CMGI gained $15.44 to $120.19.
* Among telecom names, Qualcomm zoomed $16.31 to $146.88 and JDS Uniphase soared $20.75 to $235.50.
* Securities firms rose as investors bet on strong first-quarter profits. Merrill Lynch zoomed $5.88 to $93.50, Morgan Stanley Dean Witter gained $3.44 to $65.75 and Charles Schwab surged $2.06 to $39.56.
National Discount Brokers rocketed $6.63 to $33 after linking with Yahoo’s Web finance site.
* Biotech issues resurged after recent profit-taking. Human Genome Sciences gained $17.19 to $191.69 and Genentech jumped $14.13 to $170.13.
* Among blue chips, sellers sent Honeywell down $2.06 to $45.19, Merck down $2.38 to $63.13, Alcoa down $1.38 to $71.13 and Procter & Gamble down $2.25 to $90.63.
But 3M jumped $2.81 to $92.31.
* Energy stocks also weakened again, with Exxon Mobil down 81 cents to $74.63 and Chevron off $2.44 to $73.25.
* Ad agency Omnicom rocketed $8.25 to $94.50 after its bullish earnings report on Tuesday.
* Among Southland issues, Cathay Bancorp soared $8.94 to $50.38, though there was no apparent news.
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Market Roundup, C12
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Soaring Again
Major tech stocks rocketed anew Wednesday. Among the day’s big gainers:
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Wednesday Stock close change Agilent Tech. $99.00 +$7.50 Cisco Systems 138.63 +14.69 Gateway 67.75 +10.56 JDS Uniphase 235.50 +20.75 Nokia 206.00 +14.00 QLogic 135.31 +19.81 Qualcomm 146.88 +16.31 Sun Micro. 94.63 +6.63 3Com 77.63 +6.75 Vitesse Semi. 71.88 +5.13
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Source: Reuters
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Tech: Pullbacks, but Not for Long
Trading in Motorola’s shares in recent weeks is a good proxy for the tech sector’s rally in general: There have been pullbacks along the way, but they don’t last long before buyers return in droves. Daily closes for Motorola since mid-December:
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Wednesday: $160.75, up $4
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Source: Bloomberg News
