Blue-chip stocks were once again on the ascent Monday, propelled higher by some big-money mergers and encouraging earnings news.
Tech shares, meanwhile, plunged again as Compaq Computer told CEO Eckhard Pfeiffer to pack his bags and hit the road. The company's chief financial officer also called it quits. Internet stocks got reamed as well after an influential industry analyst warned of trouble ahead.
The Dow Jones Industrial Average rose 97.73 points to 10591.62 in midafternoon trading -- a healthy gain, but well off its earlier high of 10765.74. The blue-chip index was boosted in part by Citigroup (C) posting better-than-expected quarterly profit of US$1.04 a share. A string of remarkably robust earnings reports from leading financial institutions have helped allay worries about the United States being sucked into the same swamp as other economies.
But the Wired Index fell 16.15 to 632.82, and the increasingly anemic Nasdaq Composite Index was a whopping 69.64 lower at 2414.40. The S&P 500 lost 7.23 to 1311.77.
We're still seeing a big shift in cash away from the market's erstwhile darlings, tech and Internet shares, and into "cyclical" industries, such as heavy industry and energy. The 30 stocks comprising the Dow have benefited most from this transformation because, for many investors, especially the recent arrivals, they represent old-fashioned, bedrock solidity.
"People are looking for a safe haven," said Allan Roness, research director at JW Genesis Securities. "Big names make them feel safer."
As such, he expects the gains to continue for the Dow -- at least until some unforeseen calamity arises to scare off traders. "When you're riding the train," Roness said, "it keeps going until it hits a truck at the crossing."
It's noteworthy that the investing herd no longer seems to be moving in search of fresh food or water, but away from perceived danger rustling the tall grass. Such behavior suggests increased volatility on the horizon as traders go into duck-and-cover mode every time things get ugly.
Certainly that's how it's played out with leading tech stocks. A little more than a week since Compaq (CPQ) issued a scary warning that its quarterly income would be about half the estimated amount -- sending its share price spiraling -- the company's stock fell an additional 63 cents to $23 after Pfeiffer was handed his walking papers.
Compaq's Chairman, Benjamin Rosen, will now serve as one of three acting CEOs until a full-time replacement for Pfeiffer is found. Rosen specifically cited the PC maker's less-than-stellar performance over the past couple of years, during which it acquired both Digital Equipment and Tandem Computers, as being behind the changes in the executive suite.
Merrill Lynch analyst Steve Milunovich said Pfeiffer's ouster "will prove positive for Compaq," although "leadership uncertainty, particularly in such a fast-moving industry, will likely put pressure on Compaq's ability to execute on current business and the remaining pieces of the Digital integration."
It put pressure on other PC-related stocks as well. Dell Computer (DELL) shed $1.44 to $36.81, and International Business Machines (IBM) was down $5.06 at $165.31. Microsoft (MSFT) dropped $2.56 to $84.06, while Intel (INTC) was 50 cents lower at $56.75 even as it announced a tie-up with NBC to enhance interactive features for digital TV broadcasts.
