Wall Street blasted into record territory Friday after a teeny-weeny increase in monthly unemployment prompted traders to believe the Fed will chuck out all other evidence about white-hot US economic growth and hold interest rates at current levels.
"This was the cue, and we have to start dancing," said Arthur Hogan, chief market analyst at Jefferies & Co.
Blue chips set the pace throughout the session. The Dow Jones Industrial Average jumped 268.68 points to close at a record 9736.08, topping 9700 for the first time ever, and the Wired Index was 23.44 higher at 604.30. The Nasdaq Composite Index gained 45.38 to 2338.27, and the S&P 500 was up 28.82 at 1275.46.
The market had been waiting all week for the February employment figures, not least because Fedatollah Alan Greenspan is known to favor jobs numbers in getting a fix on inflation risk. A surprise increase in unemployment to 4.4 percent from 4.3 percent in January was sufficient to make investors think Mr. G now will stand pat on interest rates when the Fed's policymaking committee meets later this month.
Bolstering this belief was evidence that wage inflation is in check, with average hourly earnings up by just a penny in February. "Clearly, regardless of how strong the economy is, we do not see wage-price pressure," Hogan said. "The economy is not growing in a way that puts inflation in front of us."
As for Big Al, Hogan thinks the Fed chief "likes to jawbone down stock prices, but he doesn't like to jigger with monetary policy." Don't be surprised, therefore, if Greenspan compensates for holding rates firm by offering up a few more choice remarks about scary valuations.
Tech stocks, the home of high valuations, were unfazed by such a prospect. Share prices continued to rebound from the thrashing they received earlier in the week, and the enthusiasm that centered Thursday on a US$16 billion deal between Dell Computer and IBM was rekindled by news of a big acquisition on the semiconductor side.
Level One Communications (LEVL), a maker of networking chips, surged 66 percent to $45 after agreeing to be purchased by Intel for $2.2 billion. For Intel, the move represents its latest bid to diversify into new markets and retain its industry dominance in the face of greater competition. "We're deadly serious about our network communications group," CEO Craig Barrett told reporters.
Intel (INTC) advanced $1.25 to $114.63, and those who might be most antsy about the chipmaker's latest ambitions also put on a brave face. Cisco Systems (CSCO) rose $2.56 to $100.81, while Lucent Technologies (LU) was up $1.75 at $104.
Another chip tip: Sony (SNE) climbed $2.75 to $82.19 after saying it will invest about $1 billion in manufacturing processors for its next generation of souped-up PlayStation machines. The new 128-bit devices are slated to debut in Japan later this year, and to make it to action-hungry US gamers by late 2000.
IBM (IBM) gained $7.31 to $178.31 as the market continued to tip its hat to Big Blue's new partnership with Dell. Credit Suisse First Boston handed IBM a "buy" rating and predicted the company's stock will hit $230 within a year. Dell (DELL) was $4.19 higher at $86.06.
Netwise, an outfit called 7thStreet.com (SEVL), which develops applications for animated Web content, rocketed 81 percent to $5 after an unnamed money manager was quoted by Business Week as saying the company's shares "could triple in 12 months." This money manager, by the way, holds almost 5 percent of 7thStreet.com, and walked away with a big chunk of change as a result of his or her anonymous forecast.
Sometimes you have to wonder about who's minding the store over at Business Week.
At Home (ATHM) gained $2.50 to $117.75 on word that the cable-based access provider will become a component of the Nasdaq 100 Index after the closing bell on 9 March. It's replacing Tele-Communications Inc., which is being gobbled up by AT&T.
TCI isn't the only cable outfit with a new daddy. Century Communications (CTYA) escalated $3.63 to $39 after saying it will be bought for $5.2 billion by Adelphia Communications (ADLAC). The merger will create the fifth-largest US cable operator, with about 4.7 million subscribers.
But investors seem to think that Adelphia is overreaching. This latest acquisition follows a $2.1 billion buyout last week of FrontierVision Partners, and the purchase of tiny Verto Communications in December. Adelphia's stock fell $2.63 to $54.50.
IDX Systems (IDXC), a maker of health-care data systems, plunged 44 percent to $14.50 after warning that it expects a first-quarter loss resulting from delays in purchases by major customers. Analysts had been looking for profit of 35 cents a share. IDX's stock was subsequently downgraded by a slew of brokerages.
Similarly, CompUSA (CPU) tumbled 21 percent to $6.44 after warning that it, too, expects a loss in the current quarter, and the next to boot, due to sagging PC sales. Profit of 21 cents a share had been estimated for the present three months, and CompUSA also saw its shares downgraded by a handful of securities houses.
Wal-Mart Stores (WMT), on the other hand, advanced $3.88 to $93.25 after announcing a two-for-one stock split, a higher dividend and a decision to buy back $1.2 billion of its shares. This will be the first stock split for the world's largest retailer since 1993, and follows a 21 percent increase in fourth-quarter profit to 70 cents a share.
Lastly, Harvey Entertainment (HRVY), the good people responsible for Casper the Friendly Ghost and Richie Rich, climbed 13 cents to $6.50 after former CEO Jeffrey Montgomery offered to buy the company for more than $31 million. Harvey lost nearly $5 million in the nine months ended 30 September 1998.
The company said it had referred the offer to its financial advisers. No word on young Mr. Rich's position.
