Techs Lead Nasdaq Higher; Oil Prices Surge

Oil prices surged and bond yields followed Tuesday, but the Nasdaq Stock Market still staged a broad advance to close just under a record high.

Blue-chip stocks, however, took a tumble, with the Dow Jones industrials sliding 162.26 points, or 1.4%, from Friday’s record high, to end at 11,560.72.

On Nasdaq, the composite index jumped 66.54 points, or 1.6%, to 4,130.81, just under the record close of 4,131.15 set on Jan. 3.

The day’s action demonstrated once again that some investors and traders will let nothing get between them and their tech stocks--not even the highest oil prices in nine years, or the highest bond yields in 2 1/2 years.

Crude oil soared as frigid weather in the Northeast sent demand for heating oil up sharply. Near-term oil futures in New York jumped 83 cents to $28.85 a barrel, the highest price since early 1991, just before the Persian Gulf War began.

Oil is already supported by widespread expectations that the Organization of Petroleum Exporting Countries will stick with the output cuts that have lifted prices from $12 a year ago.

In the bond market, rising energy prices--which threaten higher inflation--just added to the gloom that has pervaded the market for months. The yield on the 30-year Treasury bond rose to 6.74% on Tuesday from 6.69% on Friday. (All markets were closed Monday for the Martin Luther King Jr. holiday.) The new bond yield is the highest since mid-1997.

Interestingly, the yield on the 30-year T-bond now is slightly below the yield on 10-year T-notes. That “inversion” of the so-called yield curve hasn’t occurred since December 1994. Usually, the longer a bond’s term, the higher the yield.

An inverted yield curve can be a sign that investors expect the economy to slow sooner than later.

In the stock market, however, there’s apparently no slowdown in expectations for tech companies’ growth rates.

Investors rushed back into many tech names Tuesday ahead of Microsoft’s quarterly earnings report, issued after the close. The software giant again beat expectations.

Among Nasdaq leaders, Microsoft rose $3.06 to $115.31 ahead of its earnings report, Cisco Systems gained $4.44 to a record $112, Oracle jumped $4.44 to $111.25 and Apple gained $3.50 to $103.94.

But the Nasdaq advance also included many smaller names. Rising stocks outnumbered losers by a 25-18 margin on Nasdaq, while losers had a 3-2 margin on the New York Stock Exchange.

One sign of buying in smaller stocks: The Russell 2,000 small-stock index jumped 1.2% to a record 513.46.

Among Tuesday’s highlights:

* Telecom issues got a lift from the proposed merger announced between JDS Uniphase and E-Tek Dynamics. JDS rose $3.50 to $195.69; E-Tek rocketed $42.50 to $178.38.

Other winners included Scientific Atlanta, up $7.88 to $65.44; PairGain, up $2.20 to $14; and Ciena, up $2.88 to $69.69.

* Some recent tech leaders faded. Motorola slid $7 to $144 despite strong earnings. Yahoo’s descent continued, off $11.81 to $341.19. America Online fell $2 to $61.25, renewing its slide in the wake of its proposed merger deal with Time Warner, which eased 31 cents to $81.69.

* Financial stocks fell as interest rates rose. Bank of America slid $2.50 to $48 and Charles Schwab lost $2 to $39 even though both reported strong fourth-quarter earnings. American Express slid $7.94 to $151.56.

* Drug stocks were sharply lower, reacting in part to competitive worries in the wake of the planned merger of Glaxo Wellcome and SmithKline Beecham. But investors showed doubt about the wisdom of that deal as well: Glaxo shares fell $5.94 to $54.06, and SmithKline tumbled $8 to $62.

Market Roundup, C11