Dow Slips but Nasdaq Climbs on Outlook in Tech Sector
Stocks were mixed Tuesday after aluminum maker Alcoa reported its first quarterly loss in almost eight years, but technology shares gained after a string of upbeat profit forecasts.
Comments from Altera and BMC boosted optimism that the battered tech industry is near a rebound.
“People are bidding up stocks in anticipation of a strong second half,” said Joel Silverstein, senior portfolio manager with Cohen, Klingenstein & Marks. “Everyone believes in tech. The only thing they’re quibbling about is the price. But what looks expensive now may look very reasonable a few quarters out.”
Even so, investors are treading carefully before the fourth-quarter earnings season, which heats up next week. Corporate profits are expected to suffer their biggest drop in a decade, but investors are more interested in corporate forecasts of an expected turnaround.
The technology-laden Nasdaq composite index rose 18.64 points, or 0.9%, to 2,055.74. The index has risen four of the last five sessions and is up 44% since Sept. 21.
The Standard & Poor’s 500 index slipped 4.18 points, or 0.4%, to 1,160.71. The blue-chip Dow Jones industrial average fell 46.50 points, or 0.5%, to 10,150.55, weighed down by Alcoa, which fell 82 cents to $37.34.
Still, winners outnumbered losers by a slim margin on the New York Stock Exchange, and by 5 to 4 on Nasdaq. Trading was moderate.
Shares of specialty chip maker Altera rose $1.02 to $24.92. The company said revenue would fall about 7% from the third quarter, but added, “it appears we have seen the bottom of this cycle.” Business software maker BMC rose 87 cents to $21. The company said quarterly earnings would be at the upper end of analysts’ estimates.
“People are looking past the first six months of 2002 and into the first part of 2003,” said Robert Arancio, head of Nasdaq trading at Lehman Bros. “I think you’ll get some outstanding performance from tech.”
But disappointing outlooks from computer maker Gateway and media giant AOL Time Warner kept a lid on the market. Gateway tumbled $2.56 to $7.69 and AOL lost 68 cents to $32. The world’s largest media and Internet company said it would take an accounting charge of up to $60 billion, probably the largest corporate charge on record, and reined in forecasts of earnings growth, citing the weak economy.
Citigroup, a Dow member, fell $1.89 to $49.50 and FleetBoston Financial slid 91 cents to $34.60 after a Merrill Lynch analyst said losses stemming from Argentina’s currency devaluation will reduce 2002 profits.
Heavy-equipment maker Caterpillar fell $1.80 to $51.35 after a Morgan Stanley analyst said new federal truck emissions standards might hurt earnings.
In other market news Tuesday:
* The yen fell against the dollar after the Japanese government said it won’t try to halt the currency’s 3 1/2-month decline. The yen fell to 132.74 to the dollar, compared with 131.03 on Monday. The currency also fell against the euro.
* Aflac climbed $2.42 to $25.54 after the No. 1 U.S. supplemental health insurer said it would hit analysts’ quarterly earnings estimates despite lower sales in its main market in Japan.
* Goldman Sachs Group fell $3.25 to $92.50 after Sumitomo Mitsui Banking Corp. said it will sell its 1.8% stake in the U.S. securities firm, ending a 15-year investment.
* Tuesday’s session wrapped up the first five trading days of the new year, which saw the Dow rise 1.3%, the S&P; 500 climb 1% and Nasdaq gain 5.4%. When this period finishes in the black, it often signals a positive year for the market. Over the last 52 years, the broad stock market has climbed in 38 years and dropped in 14 years. Of the winning years, 28 had a positive five-day kickoff. Of the 14 losing years, 10 had declines over the first five trading days, according to the Stock Trader’s Almanac.
