Blue Chips Rise, but Tech Stocks Sag
The Dow Jones industrial average recrossed the 10,000 mark Wednesday on hopes Congress is nearing a deal for an economic stimulus package, but technology stocks fell on news of profit woes from Motorola and Micron Technology.
It was the Dow’s fourth straight winning session, helping to erase memories of last week’s mini-sell-off. Investors were cheered Wednesday by a report that a key gauge of the U.S. economy--the Conference Board’s U.S. index of leading economic indicators--rose for a second straight month in November, pointing to an economic recovery in the first half of 2002.
“The leading indicators are saying the economy is going to recover and if they do reach an agreement on a stimulus package, all the better,” said Hugh Johnson, chief investment officer at First Albany Corp.
The Dow industrials gained 72.10 points, or 0.7%, to 10,070.49, its first close above the psychologically important level since Dec. 7. The broader Standard & Poor’s 500 index rose 6.64 points, or 0.6%, to 1,149.56. The technology-laden Nasdaq composite index slipped 21.87 points, or 1.1%, to 1,982.89.
Losers led winners 11 to 8 on Nasdaq and were about even on the New York Stock Exchange. Trading was brisk.
President Bush said Wednesday morning that he had worked out a plan with U.S. lawmakers on an economic stimulus package. Senate Democratic leader Tom Daschle of South Dakota said differences remained, but the market is betting a deal will be struck, analysts said.
“It’s this balance between worrying about corporate profits and, ‘Let’s look forward to an economic rebound,”’ said John Forelli, portfolio manager at Independence Investment. “Investors are fearful of selling stocks with the thought that in two weeks, they’ll be wanting to buy them back.”
Blue chips were boosted by news that Dow component Citigroup, the No.1 U.S. financial services firm, plans to sell as much as 20% of its Travelers Property Casualty unit to the public and spin off the rest to its stockholders by the end of 2002, in a move to ditch the slow-growing and volatile business. Citigroup gained $1.90 to $50.
Weakness in technology shares was reflected in semiconductor issues, which retreated broadly under heavy volume. The SOX chip stock index tumbled 5.2%.
Chip maker Micron finished the session down $1.71 at $30.10. It reported a wider-than-expected loss and said sales fell 73% as it continued to be hurt by plunging prices.
Motorola became the latest telecom firm to admit it has been hit by weak demand after it said it will cut an additional 9,400 jobs and that it sees lower revenue in 2002. Motorola fell 85 cents to $15.76.
A warning from aluminum producer Alcoa weighed on the Dow early in the session after it said earnings were likely to miss estimates because of unpaid bills and charges to restructure operations. Alcoa fell $2.28 to $35.38.
In other market news:
* Shares of contract electronics manufacturer Solectron fell sharply for a second session, down $1.29 at $10.81. The firm reported Tuesday a fiscal first-quarter loss of $52.5 million and said it saw declines in its personal computer and telecom operations.
* Calpine, one of the most actively traded issues on the New York Stock Exchange, rose 69 cents to $14.69 after it sold $1 billion of convertible debentures, allaying investor fears that independent power producers will be unable to access funding for their power plants.
* Williams, an energy trader and pipeline operator, rose $2.60 to $24.70 after it said it will cut 2002 capital spending 25% in a move to strengthen its balance sheet. It said it may cut earnings growth targets.
* 3Com, which late Tuesday posted a narrower-than-expected loss for its fiscal second quarter and said it hopes to return to profitability by the fourth quarter, gained 78 cents to $6.09.
