Wall Street surged deeper into record territory Thursday as investors succumbed to a convenient case of amnesia about recent earnings concerns. The fascination now is with how darn high blue-chip stocks can climb.
The Dow Jones Industrial Average rose 112.39 points to close at 10197.70, boosted by news from General Electric (GE) of a 14 percent hike in quarterly profit to a record 65 cents a share. The result was pretty much in line with expectations, though, so traders had a ho-hum reaction to GE's announcement, and the company's stock slipped 81 cents to US$113.69.
Tech shares also firmed, but their gains were reined in somewhat by yet another profit warning from Advanced Micro Devices (AMD). The chipmaker fell 81 cents to $15.38 after saying a production snafu will result in first-quarter sales being about $100 million less than anticipated. But it's not as though AMD hasn't been actively cushioning the blow for investors. The company said in February, and again last month, that a loss for the quarter is a distinct possibility.
After all these profit warnings, it wouldn't be at all surprising if AMD's stock were to go up after it finally breaks the bad news next week; anything less than bankruptcy at this point will be seen as a major plus.
The Wired Index advanced 7.71 points to 682.62, and the Nasdaq Composite Index was 28.96 higher at 2573.39. The S&P 500 was up 17.09 at 1343.98. These were all record highs.
The market's confidence was bolstered by word from the US Labor Department that fewer than 300,000 Americans filed for unemployment last week. That's 10 straight weeks the number has remained below the 300,000 threshold, and we haven't seen anything like that for a quarter-century. The Old Country scored an assist as the European Central Bank lowered its benchmark interest rate by half a percentage point. Rate reductions over there can be a boon for exporters over here.
So let's talk Yahoo (YHOO). The portal padre eased $1.75 to $206.69 after topping estimates with quarterly profit of 11 cents a share, excluding charges. Seeing as a better-than-expected performance had been expected anyway, investors decided to take their time in scooping up additional shares. Yahoo's average daily pageviews jumped to 235 million in March from 167 million in December, while revenue tripled to $86.1 million.
This wasn't good enough for Brian Oakes, an analyst with Lehman Brothers. "There was a lack of revenue growth to keep pace with the pageview growth," he said. "It could mean a slowdown for portals." Oakes reiterated a "neutral" rating for Yahoo's stock. Yahoo-watchers over at Donaldson, Lufkin & Jenrette and Jefferies & Co. were a bit more generous. Both brokerages said that the company's share price should hit $300 in coming months.
"Portals are finding their business a little tougher," said Oakes, who is of a mind that advertisers are growing impatient to learn more about who exactly is racking up those millions of daily pageviews. "Advertisers don't want a traffic fire hose," he observed. "They want to know what's working." To get such info, however, portals like Yahoo will have to shake down users for ever-more-detailed personal data, and that gets into the whole privacy thing. Nobody wants to go there.
Could it be that portals, the Web's biggest money-spinners, have had their day in the sun? It's too early to start writing any obits, but Oakes figures competition among rival players will intensify as advertisers begin expanding their horizons.
Meanwhile, from the IPO front, Value America (VUSA) startled absolutely no one with a splashy trading debut. The online retailer soared 140 percent to $55.19 after arriving with 5.5 million shares initially priced at a hefty $23 a throw. Value America lost nearly $54 million last year. Sooner or later, you all realize, this sort of thing is going to have to stop.
Online brokers enjoyed a happy spike as JB Oxford Holdings (JBOH) told analysts that it expects profit in the current quarter to meet or exceed the almost $3 million earned in the previous three months. The firm's shares soared 62 percent to $14.81, while Ameritrade (AMTD) was up 11 percent at $105.50, and ETrade Group (EGRP) rose $8.38 to $92.88.
There were some mixed messages from the software crowd. HNC Software (HNCS) tumbled 43 percent to $15.50 after warning that its first-quarter income will come in well below the estimated 22 cents a share. But Check Point Software Technologies (CHKP) climbed 26 percent to $33.69 as it looked forward to "strong results," in line with profit expectations of 44 cents.
Internet-application maker Spyglass (SPYG) gained 29 percent to $17.63 on word that it will pay more than $11 million for Navitel Communications, a developer of programs for Windows CE-based gadgets. The deal marks a further tightening of Spyglass' relationship with Microsoft (MSFT). On Wednesday, the two companies announced a licensing and cooperation accord for Windows CE products.
Microsoft's own share price advanced $1.25 to $94.56 as the company hinted that it may finally share the programming code for its Windows operating system with software developers -- a move that would go a heck of a long way in making nice with antitrust regulators. Separately, Redmond said that it would release an upgraded version of Windows 98 next year, putting the kibosh, at least for the moment, on introduction of a one-size-fits-all Windows 2000 system.
There were smiles in the retail sector. Wal-Mart Stores (WMT), the world's biggest retailer, rose $4.50 to $102 after saying that March sales in stores open at least a year increased 11 percent from a year before. And Gap (GPS) was $4.19 higher at $72.56 on news that its March sales were up 21 percent. Must be those way-cool commercials the company's been running.
Celestial Seasonings (CTEA), maker of those tasty herbal teas that keep hyperactive financial columnists from becoming nervous wrecks, sank 16 percent to $17.38 as it warned quarterly earnings will come in at around 28 cents a share, nowhere near the anticipated 41 cents. Celestial's stock was promptly downgraded by a pair of securities houses.
Lastly, some heightened interest in Bill Gates' bank account from our friends across the Atlantic. The BBC noted that recent gains in Microsoft's value mean that Gates is now worth $100 billion and is on track to become the world's first trillionaire. At the same time, London's Daily Telegraph figured that Big Bill earned about $4.5 million an hour last year, and at this rate should hit $1 trillion by 2004.
Herbal tea, lads?
