Investors Cautious in Pre-Election Trading
Blue chip stocks surged Monday, lifted by a pre-election spending spree that sent the Dow Jones industrial average as high as 11,000. But technology issues couldn’t keep up, weighed down by investors concerned about Cisco Systems’ earnings.
Analysts cautioned against reading too much into the Dow’s rally, saying uncertainty still rules Wall Street.
“You’re a day before a presidential election that nobody can get their arms around, so there’s gravitation toward buying safe blue chips,” said Larry Wachtel, a market analyst at Prudential Securities. “But trading volume is low, breadth is negative and generally this is a very cautious day.”
The Dow closed up 159.26 points, or 1.5%, at 10,977.21, losing some ground after hitting 11,000 for the first time since mid-September. The average has climbed more than 1,000 points in the 13 trading days since Oct. 18, when it fell as low as 9,571.40; this was the Dow’s fastest 1,000-point gain ever.
Broader stock indicators were mixed. The Nasdaq composite index fell 35.37 points, or 1.0%,to 3,416.21, with much of its loss coming in the last hour of trading. The Standard & Poor’s 500 index was up 5.50 points, or 0.4%, at 1,432.19.
The election-eve uncertainty affected the bond market as well. U.S. Treasury prices fell on concern that the next administration may enact tax or spending policies that would trim the federal budget or stimulate economic growth--both of which could cause bond yields to climb. The yield on the benchmark 10-year Treasury note--which moves in the opposite direction of the price--climbed to 5.86% from 5.82% on Friday, and now is the highest since early October.
“All eyes are on the election and how the market reacts afterward,” said Michael McGlone, a bond analyst at Aubrey G. Langston & Co.
On Wall Street, tech stocks struggled, pulled lower in regular trading by Cisco, which fell $1.63 to $55.13 in regular trading. After the market closed, Cisco announced first-quarter earnings slightly ahead of Wall Street estimates, but worries about future revenues sent its shares down another 69 cents to $54.38 in after-hours trading.
Oracle fell $2.38 to $27.94. JDS Uniphase slipped $3.81 to $77.44.
Blue chips’ advances were spread across many stock sectors, but pharmaceutical, energy and defense stocks were particularly strong.
Drug maker Merck rose $2.13 to $90, energy company Enron shot up $4.19 to $81.56 and defense contractor Lockheed Martin climbed $1.21 to $33.51.
Financials also performed well, led by banker J.P. Morgan, which rose $4.81 to $166.31.
Declining issues outnumbered advancers by a 12-to-11 ratio on the New York Stock Exchange, where trading was subdued. On Nasdaq, decliners led advancers by about 21-18 and volume was 1.57 billion shares.
Among Monday’s market highlights:
* Transmeta Corp., a Santa Clara, Calif., computer-chip developer, agreed to sell 13 million shares at $21 apiece in its initial public offering, above its forecast price range. Transmeta’s IPO will raise $273 million before expenses and values the company at $2.68 billion. The company, which makes chips for computers and mobile Internet appliances, Friday boosted its asking price for the shares from $16 to $18 from its initial $11-to-$13 range. Demand was still strong enough to sell above the range. The shares are scheduled to begin trading today on Nasdaq under the ticker symbol TMTA.
* Microsoft got a boost from speculation that a Bush victory would mean the Justice Department would pursue its antitrust case against the software giant less aggressively. Microsoft shares gained $1.25 to $69.50. The stock has risen 38% since mid-October.
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Market Roundup: C14, C15
