Tech Revival Pushes Nasdaq to Its Best Week Ever
Beaten-down technology stocks sprang back to life Friday and the Nasdaq composite index capped its best week in history after fresh data suggested that the economy is cooling and that the Federal Reserve’s string of interest rate increases may be ending.
Investors who have waited feverishly for an end to the stock market’s 11-week sell-off lunged at stocks after a surprisingly weak U.S. unemployment report appeared to confirm other recent evidence of a slowing economy.
Only a week removed from its lowest level of the year, the tech-heavy Nasdaq soared 230.88 points, or 6.4%, to 3,813.38. It was the third-biggest point gain ever and fifth-biggest percentage gain. For the week, Nasdaq leaped 608 points, or 19%, both records. The surge cut the index’s year-to-date loss to 6.3% and the drop from its March 10 record to 24.5%.
The Dow Jones industrial average rose 142.56 points, or 1.3%, on Friday to 10,794.76 and the broader Standard & Poor’s 500 added 28.45 points, or 2%, to 1,477.26. The Dow gained 4.7% this week, cutting its loss in 2000 to 6.1%, while the S&P; 500 climbed 7.2%, putting it in the black for the year by 0.6%.
Friday’s buying was fueled initially by tumbling bond yields and, later, by bullish statements from several Wall Street analysts.
“The correction is over,” said Al Goldman, chief market strategist at A.G. Edwards. “The employment report is icing on the cake.”
Morgan Stanley Dean Witter analyst Mary Meeker said the worst appears to be over for Internet stocks, while Merrill Lynch analyst Henry Blodget called leading Net stocks attractive investments despite the likelihood of a rocky next few months.
In general, it was deja vu all over again as “new economy” was in and “old economy” was out. Oil, drug and food stocks were among the “defensive” sectors left behind, though financial stocks surged.
Overall, Nasdaq breadth was strong, with winners topping losers by 3 to 1, as 1.9 billion shares changed hands--the highest volume since May 24.
Analysts said some of Friday’s buying was technical in nature. For example, some “short” sellers who had sold borrowed stock, betting prices would decline further, rushed to cover their bets, buying back shares and helping power the rally.
The bond market, while initially stoking stocks’ rally, petered out--a worrisome note, some traders said. The yield on the 10-year T-note plunged from 6.20% on Thursday to 6.03% early Friday. But profit-taking in bonds then drove the yield back up by the end of the session. It closed at 6.15%, though that still was the lowest close since April 26.
The two-year T-note yield fell as low as 6.44% on Friday but ended at 6.55%, down from 6.60% on Thursday and also the lowest since April 26.
In other markets, the dollar fell further against the euro, while gold rallied to $281.40 an ounce, up $8.90.
Among the equity highlights:
* Tech gainers included Motorola, up $3.14 to $36.81 after its 3-for-1 stock split took effect, and Commerce One, up $9.31 to $50.31 on news of a contract award.
Tech stocks aided by analysts’ touts included Micron Technology, up $5.75 to $77.19; RF Micro Devices, up $15.88 to $127.25; DoubleClick, up $8.75 to $54.50; Jabil Circuit, up $3.75 to $44.38; and Newport, up $10.63 to $66.
Among the Net names cited by Merrill’s Blodget, Yahoo gained $14.44 to $134.50, Amazon.com surged $7.69 to $57.88 and EBay climbed $9.81 to $77.19.
* In the oil sector, profit-taking slammed many stocks on worries that OPEC may soon increase production. Exxon Mobil slid $3.75 to $79.19, Baker Hughes tumbled $3.31 to $32.06 and Apache lost $3.88 to $56.
* Drug stocks also were sharply lower as investors migrated back to technology and biotech. Johnson & Johnson fell $3.69 to $84 and Merck slid $3.50 to $68.94.
* Among other old-economy stocks getting clipped were Procter & Gamble, down $1.63 to $64 on speculation of further profit woes, and insurer Progressive, off $4.56 to $93.13 on a CS First Boston downgrade.
But most bank and brokerage shares surged. Citigroup rose $3.31 to $66.63, Bank of America leaped $4.19 to $61 and Goldman Sachs gained $10.50 to $86.88.
* Northwest Airlines rallied $6.38 to $35.44 on TV news reports that AMR is in talks to buy it.
Market Roundup, C4
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Taking Stock of The Week’s Rally
Spurred by hopes that U.S. interest rates have peaked, the Nasdaq composite surged a record 19% for the week, and the Standard & Poor’s 500 rose 7.2%. Major tech stocks led the rally Friday.
The Blue-Chip S&P; 500
Nears Its Old High . . .
Weekly closes and latest for the S&P; 500:
. . . But Nasdaq Still HasPlenty of Ground to Retrace
Weekly closes and latest for the Nasdaq composite:
Friday’s Gains
in Key Techs
Fri. close
Stock and change
*--*
Friday Stock Close Change Agilent $81.75, +$8.75 Apple 92.56, +3.44 Broadcom 164.44, +19.81 Cisco Sys. 64.38, +3.44 CMGI 58.50, +7.63 Gateway 54.75, +5.75 Hewlett-Pack. 142.13, +7.88 IBM 108.81, +2.81 Intel $134.19, +4.50 JDS Uniphase 110.38, +12.13 Microsoft 66.31, +1.75 Oracle 80.19, +2.31 Qualcomm 72.69, +3.69 QLogic 61.81, +7.25 Vitesse 65.44, +8.94 Yahoo 134.50, +14.44
*--*
Source: Bloomberg News, Reuters
