Tech Stocks Rise, but Blue Chips Stumble
The stock market’s split personality returned Wednesday, as many technology stocks rebounded while blue chips fell amid rising bond yields.
The Nasdaq composite index jumped 63.68 points, or 2.6%, to 2,491.40, as a morning slide gave way to an afternoon rally.
The Dow Jones industrial average closed down 107.91 points, or 1%, at 10,795.41, as some “old-economy” stocks were hit by selling.
The tech sector, which has been battered for most of the last two weeks, was ripe for a snap-back, some traders said.
Despite an earnings warning late Tuesday from semiconductor manufacturing equipment maker Applied Materials, some investors rushed to buy the stock, which had fallen from $53 in late January to $41.25 as of Tuesday.
“A lot of these stocks have pretty much washed out,” said Jay Finkel, a trader at Lord, Abbett & Co. in Jersey City, N.J. “They’re not going down on bad news anymore.”
Telecom networker JDS Uniphase, which also warned Tuesday about weaker results, rose $2.75 to $41.25 on Wednesday.
“The Nasdaq is trying to make a bottom,” said Peter Canelo, U.S. investment strategist at Morgan Stanley Dean Witter.
Still, analysts said investors remained unsettled by congressional testimony Tuesday from Federal Reserve Chairman Alan Greenspan, who hinted that future interest rate cuts could be less aggressive than the market wanted.
Indeed, Treasury bond yields continued to rebound on concerns about the Fed’s rate plans. The yield on the 10-year T-note rose to 5.12% from 5.07% on Tuesday. The two-year T-note jumped to 4.88% from 4.72%.
A report that U.S. business stockpiles chalked up their smallest gain in almost two years in December sparked more selling of Treasuries and added to the speculation that the Fed won’t cut rates before its March 20 meeting, said Kevin Flanagan, a money market economist at Morgan Stanley Dean Witter.
Although the Nasdaq index rose, falling stocks outnumbered winners 20 to 18 in that market. On the New York Stock Exchange, losers topped winners 17 to 14 as trading volume picked up.
Old-economy stocks may have been riled by food giant Conagra’s warning that earnings will be weaker than expected near term because of the slowing economy and rising energy and promotional expenses. Conagra plunged $4.85 to $20.01.
In other markets, natural gas slumped more than 8% to a three-month low after an industry report signaled that U.S. supplies would be sufficient for the balance of the winter heating season.
Gas stockpiles fell 95 billion cubic feet to 1.04 trillion last week, the American Gas Assn. said, less than the 158-billion drop during the same week last year, when the weather was colder.
Near-term gas futures sank 50.1 cents to $5.52 per million British thermal units on the New York Mercantile Exchange, the lowest closing price since Nov. 10.
Among Wednesday’s highlights:
* Beaten-down semiconductor stocks led the tech sector. Micron Technology jumped $5 to $46.50, Vitesse Semiconductor surged $5.44 to $65.13, and Intel rose $1.69 to $34.13.
* Many software shares also gained, including Oracle, up $2.44 to $25, and Veritas Software, up $6.75 to $76.38.
* The telecom sector failed to join the tech rally amid disappointment over the initial stock offering in Europe of mobile phone giant Orange. The stock fell 6% in France in its second day of trading.
Among U.S. telecom shares, WorldCom fell $1.06 to $17.50, Verizon Communications lost $2 to $52.20, and SBC Communications fell $1.46 to $47.
* Among blue chips, Johnson & Johnson fell $1.25 to $95.65, 3M slid $3.17 to $110.97, Philip Morris lost $1.57 to $46.03, and H.J. Heinz lost $2.07 to $43.02.
Market Roundup: C9-10
