Wall Street was cautiously higher in mid-afternoon trading Tuesday as traders mulled how the latest productivity numbers -- the best in years -- will influence the Fed's thinking on interest rates.
The Lycos soap opera, meanwhile, took yet another twist, sending the portal's shares rocketing skyward.
The Dow Jones Industrial Average rose 21.92 points to 9749.53 after earlier coming only a point shy of the 9800 mark, and the Wired Index was 5.60 higher at 612.86. The Nasdaq Composite Index gained 7.32 to 2404.94, and the S&P 500 was up 3.59 at 1286.32.
After opening weaker, stocks followed bonds northward as the US Labor Department reported that productivity of American workers increased at a 4.6 percent annual rate during the final quarter of 1998, the best showing in six years. With wages holding steady, traders read these latest stats as a sign that inflation remains nowhere to be seen, and that the Fed thus will refrain from hiking rates.
Al "The Investor's Pal" Greenspan chimed in with a speech lauding US economic expansion. "Growth of output has remained vigorous, unemployment is lower than it has been in nearly 30 years, and yet, despite the tautness in labor markets, there have been no obvious signs of emerging inflation pressures," the Fedmeister said.
Investors required no further motivation to break out their shopping lists.
Some of the biggest action was to be found in Lycos' (LCOS) corner, where the portal's stock was soaring 16 percent to US$97.50. The rise stems from David Wetherell, CEO of venture-capital firm CMGI, quitting Lycos' board to protest what he called the "inadequate" terms of the company's merger with USA Networks. CMGI is Lycos' biggest investor.
Wetherell said that by exiting Lycos' board, he would be "free to explore the best options available to Lycos shareholders, including the possibility of Lycos remaining independent." Or, including the possibility of forcing Barry Diller, head of USA Networks, to revisit the deal and come up with a higher valuation of what Lycos brings to the table.
"CMGI is saying that Lycos is worth a lot more, and the shareholders are of a belief that Lycos can renegotiate a better deal," said Rob Martin, an analyst with Friedman, Billings, Ramsey. "The concept that Diller's assets are worth more than Lycos is what CMGI's balking at."
Lycos' stock has tumbled in recent weeks amid growing dissatisfaction with the terms of the merger, under which Lycos would be joined with USA's electronic-retailing properties. In a separate deal, Lycos is now in the process of acquiring Wired News' parent company.
In the day's other rude awakening, Advanced Micro Devices (AMD) fell $1.81 to $17.13 after warning that production snafus will cause the chipmaker to report a "significant" first-quarter loss, and that it will cut about 300 jobs in coming months. The Street already was braced for an estimated quarterly loss of 9 cents a share, so AMD now can be expected to come up well short of even that mark. The company's shares have dropped almost 40 percent since the start of the year.
Microsoft (MSFT), on the other hand, gained $4.31 to $163.31 after the Seattle Times reported that the software titan and Justice Department are looking for ways to settle the government's antitrust case against the company. If so, this would follow a similar such compromise with Intel, which announced a pending settlement of its own case on Monday.
IPO watch: An outfit called RoweCom (ROWE), which helps companies manage online business libraries, surged 70 percent in its trading debut to $27.19. The company sold 3.1 million shares at an initial price of $16 each.
Heads up, day traders. Next week iVillage, FlashNet Communications, and Multex.com are each slated to go public.
