It didn't take much to get stocks soaring Thursday -- only a US$16 billion partnership between two of the biggest names in the tech world.
Wall Street latched onto news of a pact between Dell Computer and International Business Machines as just the medicine it was looking for to cure a chronic case of rate-hike blues. While the market could very well experience a relapse on Friday when the latest employment data is announced, investors seemed more than content to forget their worries for at least a while and push top-drawer share prices higher.
Tech stocks gave up some of their gains in the late afternoon, but blue chips held firm. The Dow Jones Industrial Average rose 191.52 points to close at 9467.40, and the Wired Index was 6.28 higher at 579.53. The Nasdaq Composite Index gained 27.84 to 2293.04, and the S&P 500 was up 18.94 at 1246.64.
Adding to the market's upbeat mood was word from the US Commerce Department that new orders for factory goods increased 1.7 percent in January to an almost $350 billion annual rate -- a record high. While this should have fueled traders' anxiety that the Fed will put the brakes on all this growth with an uptick in interest rates, the January rise was in fact a tad less than had been expected, which eased fears of higher inflation in the bond market.
As bonds found their footing, stocks were able to return to their usual headline-driven volatility. Treasury Secretary Robert Rubin assisted with a little cheerleading from the sidelines, saying the US economy should remain "solid and sound" while Europe and Japan muddle along.
"Investors were looking for any good news," said Jim Penhune, an analyst with the Yankee Group. Dell and IBM certainly fit the bill. "This will help IBM in the consumer space, where they've been weak," Penhune observed, "and it will help Dell with services."
Traders agreed. Dell (DELL) advanced 94 cents to $81.88, and IBM (IBM) was $4.19 higher at $170.94. Under terms of the seven-year accord, Dell will purchase billions of dollars worth of networking, storage, microelectronics, and display equipment from IBM. There also will be cross-licensing of patents and, perhaps most intriguingly, cooperation on development of future products.
For both companies, the alliance fills in gaps in their respective operations, and should serve to make each a more formidable player in the computer industry. Not surprisingly, Compaq Computer (CPQ) slipped 69 cents to $33.19, and Hewlett-Packard (HWP) was down $1.38 at $67.44.
If any rival PC maker is endangered by Dell and IBM getting cozy, its Gateway (GTW), which has struggled to stay ahead of the curve as the rest of the industry figured out the direct-sales business model. "Gateway has been feeling the heat for a while now," Penhune said, adding that the Dell-IBM partnership won't make things any easier for the firm. Gateway's stock slid $1.88 to $67.25.
On the chip side, Micron Technology (MU) closed unchanged at $52.63 as its shares were upgraded by Gruntal & Co. to "strong buy" from "buy." Intel (INTC) fell $1.31 to $113.38, while Advanced Micro Devices (AMD) was 13 cents higher at $18.25.
Microsoft (MSFT) gained $2.63 to $152.25 after announcing its acquisition of CompareNet, an online comparison shopping service. Terms of the purchase weren't disclosed. Separately, Redmond launched a new e-commerce blitz aimed at getting more companies doing business on the Web.
From the Great White North comes the moose call of a merger between AT&T Canada and local phone company MetroNet Communications. America's AT&T (T), which owns a third of its Canadian cousin, gained $1.13 to $84.50.
Netwise, Web-hosting outfit Verio (VRIO) jumped 12 percent to $36.50 after agreeing to pay $42.5 million to market its services on America Online. About 7,000 AOL and CompuServe Web-hosting customers will be transferred to Verio.
For its part, AOL (AOL) eased 63 cents to $86.44 after AT&T boss C. Michael Armstrong said his company has no interest in acquiring the online service, pouring cold water all over the persistent rumors that a buyout could be in the works. "We are absolutely not interested in nor are we pursuing acquiring America Online," Armstrong said. There.
CheckFree Holdings (CKFR) plunged 11 percent to $31.50 after the online bill-paying service was downgraded to "neutral" from "outperform" by Lehman Brothers. Meanwhile, payroll-services firm Paychex (PAYX) was up 11 percent at $42.88 as its rating was raised to "buy" from "outperform" by Salomon Smith Barney.
Circuit City Group (CC) rose $6 to $63.06 after saying it expects fiscal fourth-quarter earnings from its retail outlets to come in around $1.24 a share, well ahead of the expected $1.13. Circuit City said demand for digital video-disc players, wireless phones, and satellite TV is running hotter than anyone anticipated, and that income from consumer electronics could be up as much as 25 percent this year.
Wal-Mart Stores (WMT) also was stronger, gaining $2 to $89.38 after reporting that sales at branches open at least a year increased more than 10 percent in February from a year before. So-called same-store sales for nearly all leading retailers topped expectations for the month.
Lastly, it's International Game Technology (IGT), the world's biggest maker of slot machines, tumbling 20 percent to $14.69 after warning that it won't meet analysts' estimates for fiscal 1999 due to slower sales. The Street had been looking for a jackpot of $1.54 a share. International Game is worried as well about pending legislation that would restrict it from receiving a share of the take from machines at Las Vegas casinos.
Snake eyes.
