Blue Chips Rise, Tech Stocks Sag
Blue-chip stocks closed modestly higher Tuesday after the government reported a surprisingly strong rise in U.S. workers’ productivity, but weak semiconductor stocks again weighed on the technology sector.
The Dow Jones industrial average edged up 57.43 points, or 0.6%, to 10,458.74 as winners topped losers 17 to 14 on the New York Stock Exchange.
But losers dominated on Nasdaq, where the composite index slipped 6.47 points, or 0.3%, to 2,027.79.
In the bond market, yields rose slightly across the board as the government launched its quarterly refinancing with the sale of $11 billion of 4 3/4-year notes.
Markets had been braced for a poor report on second-quarter productivity, but the gain was bigger than expected, boosting hopes for a recovery in corporate profits in coming quarters.
“You’ve started to see some signs in the economic data that things are going to be looking a bit better,” said Richard Nash, investment strategist at Key Asset Management in Cleveland. Even so, he said, “Until some of that data start showing up in company reports, the market is probably going to trade a little listlessly.”
Indeed, after regular trading ended, Cisco Systems reported a 25% plunge in quarterly sales.
In the bond market, the government sold its new 4 3/4-year notes at a yield of 4.67%, amid strong demand. The Treasury’s refinancing continues today with the sale of 10-year notes. On Thursday, Uncle Sam will sell 30-year bonds.
Among Tuesday’s highlights:
* Blue-chip winners included General Electric, up $1.38 to $42.77; 3M, up $1.48 to $110.85; and Merck, up $1.06 to $68.48.
* Semiconductor stocks, which had rallied sharply last week, were broadly lower. Brokerage CS First Boston advised clients to stay away from the sector, saying many of the shares are overvalued. Last week, Merrill Lynch advised buying chip stocks, saying sales were probably bottoming.
Falling chip shares Tuesday included Micron Technology, down $1.08 to $40.93; Texas Instruments, down $1.29 to $35.45; and Broadcom, down $2.23 to $45.48. But Intel added 34 cents to $30.62.
* Also in the tech sector, CDW Computer Centers fell $2.58 to $43.24. July sales were flat, and the technology reseller lowered third-quarter sales and profit targets, Bloomberg News reported.
Serena Software tumbled $4.35 to $14.75. The manager of software installations for businesses lowered its full-year earnings and revenue forecast. Exodus Communications surged 29 cents to $2.06, in part on rumors that it might attract a takeover offer.
* Conseco sank $2.50 to $11.70 after the insurer reduced earnings forecasts for this year and reported a second-quarter loss. Conseco said stock market declines probably will lead to further write-downs related to its annuities business.
* Major electric utilities recovered after plunging Monday. But NewPower Holdings, formed last year by Enron, slid $2.27 to $5.08 after posting a quarterly loss and warning of a third-quarter loss as well. It cited regulatory problems.
* Home builders’ shares continued to decline. Ryland lost $3.15 to $52.15. Lennar fell $1.08 to $40.92.
In foreign trading, Argentina’s stock market rebounded 1.6%. But the nation’s cash and gold reserves fell $690 million Friday to a five-year low of $15.7 billion as the central bank covered a wave of bank withdrawals amid continuing fears of a currency devaluation, Bloomberg News reported.
Market Roundup, C6-C7
