Tech Stocks Fall on Profit Taking
After a strong start, blue-chip stocks eked out slight gains Friday amid renewed hopes for an economic recovery, but Nasdaq finished lower on near-record volume as investors booked profits from a rally on news of Oracle Corp.’s proposed takeover of software rival PeopleSoft Inc.
“The most critical piece of news ... is Oracle’s bid for PeopleSoft,” said Keith Keenan, vice president of institutional trading at brokerage Wall Street Access. “That means Oracle is confident about the economy going forward, and they think earnings are going to hold up.”
The market’s weak performance after a fast start -- the tech-heavy Nasdaq composite was up 38 points early on -- represented “normal profit taking ahead of the weekend,” said Tim Heekin, director of trading at Thomas Weisel Partners.
The blue-chip Dow Jones industrial average rose 21.49 points, or 0.2%, to finish at 9,062.79, after rising 175 points in early going. The Standard & Poor’s 500 index fell 2.38 points, or 0.2%, to 987.76, after earlier rising above 1,000, threatening to close above that benchmark for the first time in a year. The Nasdaq composite closed down 18.59 points, or 1.1%, at 1,627.42.
Winners and losers were about even on the New York Stock Exchange in heavy trading, but decliners prevailed by about 4 to 3 on Nasdaq, where volume hit a high for the year and was the fourth-largest in that market’s history.
All three major stock indexes managed to notch their second straight week of gains: The Dow rose 2.4%, the S&P; 500 by 2.5% and Nasdaq by 2%.
A government report showing that U.S. payrolls lost a net 17,000 jobs in May, sharply below expectations, helped investors’ sentiment as the data hinted of improving conditions in the weak labor market. That report, however, showed that the U.S. unemployment rate rose in May to 6.1%, the highest since July 1994. But that was in line with Wall Street’s expectations.
Tech stocks got a boost earlier from the soaring shares of PeopleSoft, which rose almost 18%, after Oracle, the world’s No. 2 software maker, offered to buy its rival for $5.1 billion. PeopleSoft shares, the most active on Nasdaq, jumped $2.71 to $17.82, while Oracle’s fell 27 cents to $13.09.
Among other companies said to be takeover targets, Sun Microsystems was the third- most-active issue on Nasdaq and gained 28 cents to $5.20.
“I suspect that a lot of investors thought this might be the start of new [mergers and acquisitions] activity,” said Angel Mata, managing director of listed equity trading at Legg Mason Wood Walker.
In other highlights:
* Intel ended 8 cents lower at $21.76, after earlier rising as high as $22.92 and lifting semiconductor stocks. On Thursday, after the close, the chip maker narrowed the range of its expected second-quarter revenue and left the midpoint of its previous forecast unchanged, reflecting stronger demand.
* Helping the Dow, McDonald’s Corp. surged $1.78, or 9%, to $21.06. The fast-food company said comparable sales at its restaurants rose 2.2% in May, reversing 14 straight months of declines.
* General Electric, the largest company by market value, gained 52 cents to $30.30. Low interest rates and tax breaks for dividend income should boost electrical equipment stocks that already are poised to benefit from an economic recovery, a Smith Barney analyst wrote.
* Biogen dropped $2.73 to $46.41. The No. 4 U.S. biotechnology company said 2003 royalty revenue may be less than expected because income from Schering-Plough’s Intron hepatitis treatment fell.
* Crude oil closed higher, pushing above $31 a barrel to an 11-week high amid expectations that world oil producers would come to some agreement in the next few days on restraining output. Crude for July delivery rose 54 cents to $31.28 a barrel in New York trading.
