Light Trading Lifts Blue Chips; Techs Slip
Blue-chip stocks moved higher Monday but technology issues lagged behind in one of Wall Street’s quietest sessions in recent weeks. Many investors stayed on the sidelines, resting after a week of hectic buying and selling.
The market was uninspired by the $45-billion merger announcement between General Electric and Honeywell. Even Lucent Technologies failed to move investors despite the firing of Chief Executive Richard McGinn and another profit warning, this one of weak first-quarter earnings.
The Dow Jones industrial average closed up 45.13 points, or 0.4%, at 10,271.72, after a 133-point rally in the morning failed to hold. By day’s end, declining issues outnumbered advancers 13 to 10 on the New York Stock Exchange, where volume was the slowest since early October.
Broader indicators were lower. The Nasdaq composite index fell 14.45 points, or 0.4%, to 3,468.69. The Standard & Poor’s 500 index fell 1.15 points, or 0.1%, to 1,395.78. On Nasdaq, however, winners outnumbered losers by about 21 to 19.
“The market is pausing for a breath after its big recovery Wednesday and rallies on Thursday and Friday,” said Dick Dickson, a technical analyst at Scott & Stringfellow Inc. “Frankly, I’m surprised the market’s not off more than it is.”
Investors woke to the news that GE was buying Honeywell for $45 billion in stock. Both companies are Dow components. GE fell $2.50 to $49.75, while Honeywell rose $3.94 to $49.94. The news boosted some other aerospace issues, but had little, if any, impact on the broad market.
Third-quarter earnings, responsible for the market’s plunge and recovery last week, also generated little excitement.
Shares of 3M, another Dow component, climbed $2.56 to $89.81 after the manufacturing company’s quarterly earnings per share beat Wall Street estimates by a penny. Optical networking company Corning also came in ahead of analysts’ estimates by 1 cent, but the stock was down $4.50 to $101.44.
Concern about Lucent did not appear to be driving the market. The company’s stock, which has fallen almost 70% this year, fell 56 cents to close at $22.06.
Microsoft lost $3.06 to $62.13 as traders took profits after last week’s positive earnings report.
Analysts weren’t worried about the mixed trading Monday, saying the respite was expected after last week’s intense activity.
“We’re getting into the good profit news, valuations have become considerably more attractive . . . and the tax law selling season is about over,” said Tom Galvin, chief equity strategist at Donaldson, Lufkin & Jenrette. “I think the cash on the sidelines is wanting to come back in to work.”
More than half the S&P; 500 members have reported third- quarter profits, which have risen an average 16.4% from a year ago, according to First Call/Thomson Financial. Analysts expect third-quarter profit growth of 16% when all the index’s members have reported, down from the 17.2% they forecast at the beginning of September.
Analysts project 13.8% earnings growth in the fourth quarter. That’s less than the 15.5% analysts expected in September. S&P; 500 companies’ profits grew 21.6% in the second quarter.
About 146 companies are expected to report profits this week, compared with 190 last week.
Here are some of Monday’s market highlights:
* Merck rose $2.88 to $84.75 after Salomon Smith Barney’s Christina Heuer said the company’s faster-than-forecast third-quarter profit growth points to further strength in earnings for coming quarters. She raised Merck to “outperform” from “neutral.”
Other drug stocks rallied along with Merck. Pfizer gained $2 to $45.38, Bristol-Myers Squibb rose $1.19 to $62 and Abbott Laboratories advanced 50 cents to $49.31. In addition, the American Stock Exchange pharmaceutical index rose 2.9%.
* Biotechnology companies also gained. Biogen rose $4.75 to $59.06 and Medarex jumped $7.56 to $64.81 as the Nasdaq biotechnology index gained almost 4%. Another member of the index, Vertex Pharmaceuticals, surged $13.19, or 17%, to $92.94. The company and European partner Glaxo Wellcome won clearance to sell their AIDS medicine Agenerase in the European Union.
* Ariba jumped $2.75 to $132.50 after the Nasdaq Stock Market said it would add the software company to the Nasdaq 100 Index. Ariba will replace NTL in the index of the largest non-financial stocks on Nasdaq. NTL, a telecom company, fell $1.50 to $41.13.
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Market Roundup, C14-15
