Dow Up Again; Tech Stocks Rally
Microsoft Corp.’s antitrust settlement stoked a strong rally in technology shares Monday, but blue chips gave up much of their advance by the close as investors pulled back ahead of the elections.
The Dow industrials, which include Microsoft, rose as much as 213 points by midday, then sold off in the final hour, closing with a gain of 53.96 points, or 0.6%, at 8,571.60.
The Nasdaq composite, which also includes Microsoft, gained 35.84 points, or 2.6%, to 1,396.54. It had been up as much as 4.4%.
Microsoft rallied $3.10 to $56.10, a gain of nearly 6%, on the heels of a judge’s decision Friday approving an antitrust settlement that was largely in the software giant’s favor.
The tech sector in general rallied as some investors apparently viewed the settlement as the lifting of a cloud over the sector. Even most of Microsoft’s archrivals gained ground.
Oracle, for example, rose 11 cents to $10.24, while AOL Time Warner added 38 cents to $15.53.
“Tech got way overdone on the downside” with the lows many of the stocks reached in mid-October, said Scott Bleier, president of Hybridinvestors.com, a research advisory service, explaining the continuing gains in the sector in recent weeks.
But profit taking hit in the final hour Monday. Some analysts attributed the selling to caution in advance of today’s elections, with control of Congress hanging in the balance.
Still, more stocks rose than fell. Winners topped losers by 19 to 13 on the New York Stock Exchange and by 21 to 12 on Nasdaq in active trading.
The market has scored four straight weeks of gains, raising hopes that the long bear market has run its course.
Analysts have credited part of the latest advance to expectations that the Federal Reserve would cut its key short-term interest rate when policymakers meet Wednesday.
The Fed is expected to trim its rate from 1.75% to 1.5% to help the economy regain momentum. Reports in recent weeks have suggested that consumer spending has slowed.
Anticipation of a rate cut perhaps soothed investors after news Monday from the Commerce Department that factory orders fell 2.3% in September.
In the bond market, Treasury yields rose modestly after falling sharply last week. Traders said some investors are jittery ahead of the government’s sale this week of $40 billion in long-term bonds. The bonds will help finance the federal budget deficit.
The 10-year T-note yield rose to 4.04%, from 4% on Friday.
Although a Fed rate cut could keep downward pressure on bond yields, “People are starting to come out of low-yielding Treasuries and into stocks on the expectation the economy will improve,” Bob Ried, an economist at Ried Thunberg & Co., a Westport, Conn.-based research firm, told Bloomberg News.
“There’s a growing feeling that the stock bear market may be ending. That’s negative for Treasuries” in the longer run, he said.
Among Monday’s highlights:
* In the tech sector, IBM rose $2.10 to $82.50, while Cisco Systems climbed 70 cents to $12.31.
* Among battered airlines, UAL surged 62 cents to $3.18 after the parent of United Airlines reached a tentative $2.2-billion cost-cutting deal with pilots, lessening chances it would seek bankruptcy protection.
* Retail stocks were mixed. Kohl’s fell $3.01 to $57.99 after Prudential Securities cut its rating to “hold” from “buy.”
* Defense stocks tumbled as some investors took profits in that sector and bought other stocks, analysts said. Lockheed Martin slumped $6.15 to $50.23 and Northrop Grumman dropped $6.75 to $94.02.
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Market Roundup, C9-10
