Call it revenge of the smokestack industries.
Stocks of companies that offer oldfangled products and services -- cars, movies, pharmaceuticals, overnight delivery -- rose on Tuesday. They advanced in part because investors continued to flee tech stocks, those tempermental investments that don't behave well when there's the slightest risk of slowing profits.
"The market is nervous here about third-quarter earnings, and especially about technology stocks," said Barry Hyman, market strategist at Ehrenkratz, King Nussbaum.
As it turns out, the profits of smokestack companies aren't slowing down much. People still have to buy clothes, shoes, drugs, and cars in bad economic times. Technology stocks, however, suffer more during uncertain conditions because companies tend to immediately cut back on capital spending when their own profits are threatened.
That's why the Dow, chock full of smokestack industries, rose 16.74 on Tuesday to 7742.98, while the Nasdaq, home of technology heavyweights, dropped 25.84 to 1510.85. The Wired Index, a mix of the old and new, lost 3.64 to 340.62.
Investors paid close attention to Washington, where world economic ministers were meeting to figure out how to stop the economic wildfires of the past year from heating up and spreading. The news wasn't encouraging.
"Today the world faces perhaps its most serious financial crisis in half a century," President Clinton said, in a sober assessment of the risks facing the world economy.
Worldwide economic trouble particularly hurts technology companies, which tend to get a bigger part of their revenue from abroad than traditional industries.
That's part of the reason why technology stalwarts like Microsoft, Cisco Systems, Dell Computer, and Intel had another bad day.
Microsoft (MSFT), the world's biggest software company, fell US$3.56 to $97.63, Cisco (CSCO) dropped $2.13 to $46.188. Dell (DELL) declined $2.38 to $55.31 and Intel fell 94 cents to $79.63.
Non-tech components of the Wired Index fared better. The Walt Disney Co. (DIS) rose 31 cents to $25.38 after saying late Monday that it had begun negotiations on a new contract with union leaders representing about half of its 51,000 employees. The company also put a temporary freeze on salary increases and promotions at its ABC television network to cut costs.
Daimler-Benz, which will acquire Chrysler later this year, made another acquisition. This time, its Freightliner heavy truck unit is buying Thomas Built Buses, one of the biggest makers of school buses in the United States. The purchase price wasn't disclosed. Daimler-Benz (DAI) shares in the United States rose $1.31 to $72.38.
Freightliner's chief said the move is part of Daimler-Benz's strategy to become the biggest medium-truck and bus manufacturer in North America. Would the school buses come in leather trim?
Enron (ENE) fell $1 to $52. The oil and natural-gas producer made a bid, as part of a consortium, for a huge Venezuelan natural-gas injection project that would extend the life of one of the country's biggest oilfields. Should Enron win the bid, the company would build, own, and operate a plant to inject gases into the ground for at least 20 years to keep oil flowing. The project would be worth about $400 million in investment over 20 years, and would be the largest gas injection project in the world. Schlumberger (SLB), as part of another consortium, is also bidding on the project. It rose 25 cents to $47.75.
Meanwhile, MCI WorldCom said it plans to more than double the capacity of its fiber-optic links to Europe, expanding its reach in Germany, France, and the United Kingdom. Analysts said it's a signal that the second-largest US long-distance company believes there will be plenty of demand for international telecommunications in coming years. MCI WorldCom (WCOM) gained 31 cents to $44.94.
Other telecom stocks rose, too. Cable & Wireless (CWP) gained $1.31 to $27.44.
Nokia (NOKA) rose $1.25 to $69.88, following Motorola's better-than-expected third-quarter earnings. Motorola managed to report a slim profit because of heavy cost-cutting, not increased demand. But company executives said the market for its products will improve in coming months. That's good news for Nokia, too, since it competes with Motorola for the same customers.
Wal-Mart Stores, the world's largest retailer, said its September same-store sales gained 9.5 percent from a year ago. Meanwhile, it plans to open or remodel about 280 stores next year, distancing itself even more from other retailers. All this economic trouble means people are watching their budgets, turning to discount retailers.
"The very smart US consumer is focusing upon value oriented formats," said Tom Tashjian, retail industry analyst at Nationsbanc Montgomery Securities. "Value stores such as warehouse clubs and discount stores are expected to continue the trend of gaining a greater share of consumer dollars at the expense of department store chains."
Wal-Mart shares (WMT) gained $2.25 to $59.50.
Financial columnist David Lazarus is on vacation. Reuters contributed to this report.
