Cyclicals Stoke Rally as Net Stocks Stumble
Investors swarmed back to “old-economy” stocks Tuesday, while Internet-related shares took another tumble ahead of Yahoo’s second-quarter earnings report.
Meanwhile, Treasury bond yields edged up despite some supportive comments from Federal Reserve Chairman Alan Greenspan. Traders said the Treasury market was temporarily at the mercy of another heavy load of corporate bond offerings.
On Wall Street, the Dow industrials gained 80.61 points, or 0.8%, to 10,727.19, the highest since June 7.
But the Nasdaq composite slipped 23.87 points, or 0.6%, to 3,956.42, weighed down by Internet shares.
Losers had a 21-18 edge over winners on Nasdaq in active trading. But winners had a 16-13 edge on the New York Stock Exchange.
The excitement about old-economy names was stoked by stronger-than-expected earnings from International Paper, which saw its shares surge $2.25 to $34.50. That followed strong results from Alcoa on Monday.
Bargain hunters may be taking a chance on beaten-down industrial names as optimism grows that the Federal Reserve is at or near the end of its yearlong credit-tightening campaign, traders said.
Greenspan sounded upbeat in a speech to the National Governors’ Assn. He said the explosion in the use of technology has boosted America’s productivity, the amount of output for each hour of work.
The Fed has made clear that rising productivity is critical to keeping inflation at bay. Further advances in productivity could help convince the Fed to refrain from more rate increases.
Ironically, the suppliers of technology didn’t get much lift from Greenspan’s speech. In the Net sector in particular, investors have increasingly been questioning the long-range prospects of many of the players, given slim or no profits as of yet.
Yahoo fell $4.50 to close at $105.50, the lowest since November, ahead of its earnings report Tuesday. But the results, reported after markets closed, were better than expected, helping to lift the stock in after-hours trading.
In the bond market, Treasury yields were modestly higher despite Greenspan’s speech. The 10-year T-note ended at 6.06%, up from 6.03% on Monday.
Traders said some investors are selling Treasuries to buy higher-yielding corporate bonds amid a new wave of bond sales.
Among Tuesday’s highlights:
* The Dow was boosted by such old-economy names as Dupont, up $2.31 to $47.25; 3M, up $1.75 to $88.94; and Caterpillar, up $1.88 to $36.13.
* Energy-related stocks also rocketed. Shares of sellers of oil equipment and services surged after BP Amoco said it will boost spending on drilling during the next three years. Schlumberger soared $6.16 to $74.95, Halliburton leaped $4.50 to $46.50 and Baker Hughes gained $3.84 to $34.19.
Major oil stocks also rose as crude prices stabilized. Exxon Mobil jumped $2.44 to $80.56 and Chevron surged $3 to $87.
* Brokerage stocks jumped amid rumors that PaineWebber was a takeover target. PaineWebber gained $3.81 to $49.94.
* In the Internet sector, losers included Priceline.com, down $4.75 to $32.50; EBay, down $4.13 to $43.94; and DoubleClick, down $3.19 to $28.50 after Merrill Lynch analyst Henry Blodget warned of slowing growth in Internet ad spending.
* JDS Uniphase continued to sink in the wake of its deal to buy SDL Inc. JDS lost $5.44 to $95.69. SDL fell $2.69 to $318.
* Many biotech stocks remained hot. Gilead Sciences surged $3.63 to $83, and Incyte Genomics gained $5.06 to $106.
* Among Southland firms, health-care services firm Syncor International leaped $7.81 to a record $87.25 after announcing a 2-for-1 stock split.
In foreign trading, Brazil’s market tumbled 3.4% amid rumors of a scandal involving a former top presidential aide, raising concerns about political stability.
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Market Roundup, C9-10
