Wall Street was mixed Monday as worries about a hike in interest rates subsided a bit.
After fretting all morning, investors began to think in the afternoon that a vibrant US economy could just as easily mean stronger corporate profits as it could a higher risk of inflation.
The bargain hunters also were out in force after lunch, apparently convinced that share prices will stabilize as traders gradually become resigned to the idea that rates may go up a tick when the Fed meets later this month.
The Dow Jones Industrial Average rose 18.20 points to 9324.78, while the Wired Index was 1.45 lower at 572.32. The Nasdaq Composite Index gained 7.15 to 2295.18, but the S&P 500 was down 2.17 at 1236.16.
In one of those perversities that shows how Wall Street is different from Main Street, investors were largely disappointed in the morning by news that the US economy is doing just great. The thinking here is that the Fed will inevitably raise interest rates as a hedge against inflation, even though there hasn't been a hint of inflation on the horizon for many months.
The Commerce Department found that personal income grew 0.6 percent in January, and personal spending was up 0.3 percent. These stats were both ahead of economists' estimates, and indicate that the United States is fending off the instability that has rocked Asia and Latin America. Icing the cake, the National Association of Purchasing Management released figures showing that the manufacturing sector is expanding beyond expectations.
The Street, however, surveys the landscape and still sees land mines waiting to explode. Sentiment might be improving, but traders know they aren't yet out of the woods.
One of the biggest worries is the personal computer industry, which previously had been regarded as an engine of growth that would drive the entire economy forward. Now investors are wondering if the PC crowd has had its day in the sun.
"There's a general feeling that PCs won't be as necessary in the future," said William Kurtz, an analyst with HG Wellington & Co. "There's some suspicion that smart appliances might eventually take over."
This, of course, is looking way down the road to a new era of info-tech that hasn't even hit the radar screens of most consumers. But Kurtz believes that investors are trying to stay ahead of the curve, and are already anticipating an eventual decline in PC demand as households shift to next-generation smart TVs and other such goodies.
"From an investment point of view, there's a feeling that changes are coming to the industry," he said.
Meantime, it's business as usual. Compaq Computer (CPQ) lost US$2.13 to $33.25 as Salomon Smith Barney lowered its first-quarter earnings estimate for the company to 30 cents a share from 34 cents. The world's largest PC maker, which warned last week that sales are slipping, said it will fight back by cutting prices for some models by as much as 11 percent.
International Business Machines (IBM) and Hewlett-Packard (HWP) were both lower after Lehman Brothers lowered its earnings estimates for both outfits. Dell Computer (DELL) was 50 cents higher at $80.63.
For its part, Intel (INTC) fell $2.88 to $117.06 as Donaldson, Lufkin & Jenrette downgraded the chipmaker's stock to "market perform" from "buy." DLJ analysts told clients that "PC market growth in the March quarter is not as robust as earlier indications had suggested." They trimmed their fiscal 1999 earnings estimates for Intel to $4.50 a share from $4.65.
Underlining the notion that attention is shifting from the PC and to the TV, Conexant Systems (CNXT) advanced 50 cents to $17.50 after unveiling an all-in-one chip that it says could reduce the cost of cable modems by about 25 percent. The processor is intended to help usher in an array of digital interactive services at speeds up to 1,000 times faster than a 56 Kbps analog modem.
Quantum (QNTM) accelerated 19 percent to $19.56 after saying it plans to divide its common shares into two separate tracking stocks intended to chart both its disk drive and network storage operations. If approved, current shareholders would receive a half share of the disk-drive business and one share of the storage-systems unit for each share of existing Quantum stock.
From the Internet front, eBay (EBAY) shed $11 to $323 after saying it's cooperating with a government probe into possible illegal transactions on the company's auction site. A three-for-one stock split was to take effect after the closing bell.
Yahoo (YHOO) gained $6.63 to $160.13 as it inked a marketing accord with drugstore.com. Amazon.com (AMZN), which owns almost half of drugstore.com, was up $4.88 at $133. And Lycos (LCOS), soon-to-be parent of Wired News, was 94 cents higher at $88.56 after CEO Bob Davis told an investment conference that he remains "very bullish" about the portal's growth.
ETrade Group (EGRP) climbed $2.56 to $48.56 as it became the first online brokerage added to the S&P MidCap 400 Index. ETrade was previously part of the S&P SmallCap 600. Charles Schwab (SCH), meanwhile, slid $1.88 to $72.69 after its online trading system went on the fritz for about a half-hour due to a software glitch.
In telecom, Qwest Communications International (QWST) fell $1.25 to $60.19 even as it landed part of a multimillion-dollar contract to create a dedicated network for CNN. Qwest said it will also provide enhanced video-transmission capabilities to other Turner Broadcasting System and Time Warner properties.
MCI WorldCom (WCOM) said it intends to spend about $6.5 billion this year expanding its own global network, and is especially keen to play a more active role in Asia. Investors saw this as a fairly pricey move, and MCI's stock dipped $1.81 to $80.69.
On the other hand, telecom-equipment maker Reltec (RLT) surged 34 percent to $29.13 on news that it will be acquired for about $2 billion by Britain's General Electric, which isn't the same as America's General Electric. London-based GEC specializes in defense gadgetry and communications.
Lastly, here's Kazari International (KZAR) soaring 180 percent to $7 as it bought out e-Auction Global Trading. What, another online auction house? Sort of. E-Auction provides logistics for electronic cattle trading.
Moo.
