Spree in Tech Sector Propels Stocks
Wall Street went on a technology buying spree Monday, despite the absence of an obvious catalyst, sending the Nasdaq composite index up more than 100 points and the Dow Jones industrial average to its highest close in 16 months.
The rally was notable because it came on a day when there were no major earnings or economic data. Investors appeared to be buying solely on the expectation that better times are ahead and the determination to get into the market before prices get much higher.
“There’s an old saying on the Street: When you can move a market without news, that’s the best news around,” said Larry Wachtel, market analyst with Prudential Securities. “This market has been improving for two solid months and what’s happening is that all the money on the sidelines that’s built up is barreling in. People are saying, ‘I have to get in there.’ ”
Nasdaq rose 106.71 points, or 4.9%, to 2,305.59, its highest close since late February and the first time since last August that the tech-dominated index has risen in five straight sessions.
The Dow Jones industrial average closed up 36.18 points, or 0.3%, at 11,337.92, adding to its 428.77-point gain over the last three sessions. The last time it closed as high was Jan. 20, 2000, when it reached 11,351.30.
The blue-chip index, which slipped briefly into bear market territory in March, has recovered to the point where it is just 3.3% off its highest close ever of 11,722.98, reached Jan. 14, 2000. It also has a 5.1% gain so far this year.
The Nasdaq composite, however, is off 6.7% year-to-date and is 54% below its peak of March 2000.
Meanwhile, the Standard & Poor’s 500 index was up 20.87 points Monday, or 1.6%, at 1,312.83. The S&P; is about half a percentage point away from where it started the year, but 14% below its peak close of 1,527.46 on March 24, 2000.
Two stocks rose for every one that fell on Nasdaq and the New York Stock Exchange amid active trading.
“The Nasdaq, by moving up, is confirming the strength we saw last week in the Dow,” said Todd Clark, co-head of trading at W.R. Hambrecht, who noted the Federal Reserve’s fifth interest rate cut of 2001 last week might be responsible for much of the enthusiasm. “We’re actually a little overbought right now, but that’s OK.”
Strong technology buying drove the market Monday. Sun Microsystems rose $2.99 to $22.96 on news of a five-year $200-million agreement with Eastman Kodak. Cisco Systems was up $2.67 at $22.87 on the release of a new product that allows traditional telephones to be used over the Internet.
The enthusiasm for high-tech also helped the Dow, as did a strong advance in financial stocks. American Express gained $1.29 to $44.99.
Those advances compensated for a drop in Procter & Gamble, which fell $2.23 to $65.25 after announcing it will buy Clairol, the hair care products maker, for $4.95 billion in cash from Bristol-Myers Squibb, off 71 cents at $55.29.
Analysts say conditions on Wall Street have been improving for the last six weeks, primarily in reaction to the Fed’s aggressive interest-rate reductions. Although they expect the market to hold most of its gains, they have said investors will need good news--like strong earnings or another interest rate cut--to support an extended rally. Neither is expected to happen for at least a month, but that didn’t deter investors Monday.
Although activity was sluggish early in the session, by afternoon the level of trading--and many tech stocks’ prices--had picked up as more buyers got into the sector.
Among Monday’s market highlights:
* The Philadelphia semiconductor index rocketed 7.4%, reflecting gains by Intel, up $1.14 to $29.90, and other chip-related companies. Applied Materials, the world’s biggest maker of semiconductor equipment, gained $2.52 to $57.52. Rival KLA-Tencor surged $5.13 to $60.59.
* Gold prices fell, ending a rally that commenced when U.S. interest rates fell to a seven-year low. Prices rose early, bringing the precious metal’s recent gain to 11% and pushing gold to a 15-month high. Prices retreated as traders began to question the threat inflation poses to the U.S. economy. By day’s end, gold for June delivery was down $2 an ounce to $285.80 on the New York Mercantile Exchange.
* Entertainment conglomerate Disney rose $1.68 to $34.28 on hopes the company’s World War II movie “Pearl Harbor,” which opens Memorial Day weekend, will be a big hit. A Salomon Smith Barney analyst said the film may add as much as 25 cents to Disney’s bottom line and raised the stock to a buy.
* P&G; wasn’t the only defensive stock to take it on the chin as investors flocked to the tech sector. Cigarette maker Philip Morris fell $2.15 to $50.22. Drug giant Johnson & Johnson fell 37 cents to $100.63, and Exxon Mobil lost $1.45 to $88.75. All three are components of the Dow industrials.
* Palm gained 89 cents at $5.94 after brokerage UBS Warburg upgraded the hand-held computer maker, saying the company was working hard to remedy inventory problems and enter the next fiscal year in better shape.
* Online music company MP3.com rocketed $1.84 to $4.85. French media giant Vivendi Universal said Sunday it will buy its one-time foe for about $372 million in hopes of bolstering its online music business.
* Top Internet addressing company VeriSign surged $6.92 to $67.66. The U.S. government approved a deal allowing VeriSign to retain control of the lucrative “.com” domain, the Commerce Department said late Friday.
* Lowe’s reported higher profit as the home-improvement chain managed to hold down costs. The world’s No. 2 home-improvement retailer rallied $4.10 to $72.50.
Market Roundup, C11, C12
