Wall Street turned in a mixed performance Tuesday, with blue-chip stocks reaching for yet another record high and tech shares losing ground amid earnings jitters.
The Dow Jones Industrial Average rose 55.50 points to close at 10395.01 after earlier piercing the 10400 level for the first time ever. The blue-chip index found its strength in better-than-expected earnings reports from Merrill Lynch (MER) and Paine Webber Group (PWJ), which buoyed the financial sector.
Tech stocks were hampered by continued skittishness related to a profit warning from Compaq Computer, and by fresh worries that Intel would disappoint when it posted its first-quarter income after the closing bell. The Wired Index gained 1.57 to 685.52, while the Nasdaq Composite Index was 15.33 lower at 2583.48. The S&P 500 dropped 8.82 to 1349.82.
Share prices rallied in the morning as the US Labor Department said consumer prices climbed a measly 0.2 percent last month, with a decline in food prices offsetting a big hike in energy costs. The stat suggests that Mean Mr. Inflation is still away on holiday, which means the Fed likely won't tamper with interest rates, which pleases investors to no end.
However, stocks soon grew choppy as investors succumbed to a bout of altitude sickness. Tech shares descended first, and the volatility soon spread to the rest of the market.
"Investors have taken a good, hard look at what's going to make them money over the next two quarters," said Arthur Hogan, chief market strategist at Jefferies & Co. "The money's coming out of technology and going into financial and oil and retail stocks."
Following Compaq's cannon shot across the tech sector's bow, announcing that its quarterly profit will be about half the estimated amount, traders were especially keen to see the numbers Intel would put up. Income of at least 55 cents a share was anticipated, but investors may make their disappointment known if the chip maker doesn't perform significantly better -- despite the slugfest taking place at the low end of the semiconductor market.
Intel (INTC) slipped 75 cents to US$60.50 even as Salomon Smith Barney initiated coverage of the company with an "outperform" rating. The brokerage also slapped a "hold" rating on Advanced Micro Devices (AMD), which lost 6 cents to $15.
"Intel still has no real competition," Jefferies' Hogan observed. "Its rivals, like Advanced Micro Devices, continue to disappoint."
Still, he expects the market to stabilize, and can see the Dow surpassing 11000 by year's end. "If there's something on the horizon that adversely affects interest rates, that will knock the train off the tracks," Hogan said. "But there doesn't seem to be anything on the horizon."
Elsewhere in tech, Cisco Systems (CSCO) fell $3.63 to $114.13 after the company said that it will shell out about $2 billion in stock to acquire software maker GeoTel Communications. The move is intended to allow Cisco's network hardware to provide more efficient handling of voice and data traffic. GeoTel (GEOC) surged 26 percent to $55.94.
Netwise, the good news from Merrill Lynch and Paine Webber kept online brokers on the ascent. ETrade Group (EGRP) rose 31 percent to $125.50, and Ameritrade (AMTD) was up 22 percent at $173.25. Even Charles Schwab (SCH), which tends to lag its exclusively electronic cousins, was 11 percent higher at $150.50.
On Monday, Net.B@nk (NTBK) teased investors with hints of an upcoming stock split. It didn't take long for the company to deliver. Net.B@nk vaulted 48 percent to $235.02 after announcing a three-for-one split. Similarly, Virtuallender.com (VLDC), an online mortgage service, soared 92 percent to $18 after unveiling a tie-up with Net.B@nk that will allow it to process applications faster.
Broadcast.com (BCST), now being acquired by Yahoo, shed $1.06 to $146.69 as it reported a quarterly loss of 9 cents a share. RealNetworks (RNWK), meanwhile, was down $18 at $229 on news that it expects charges of about $3.5 million related to its $75 million purchase of Xing Technology, the leading developer of MP3 software for online music transmissions.
In telecom, Cable & Wireless (CWP) dipped 13 cents to $38.63 after saying that it will spend $670 million building a new high-speed network for voice and data traffic. The network will reach 60 US metropolitan areas, and is slated to take about two years to construct. Ultimately, C&W aims to connect its American pipeline with backbone systems in Europe and Asia.
For its part, Qwest Communications International (QWST) jumped $5.25 to $96.13 after joining with Dutch telco KPN to build a new fiber-optic network. Morgan Stanley Dean Witter was unreserved in its praise for Qwest, calling it the "best telecom company in the entire spectrum."
A thought: Rumors of Qwest's acquisition have been floating around for months. With the company's share price now flirting with triple digits, it looks increasingly likely that Qwest itself will be the one doing the acquiring.
Energy giant Enron (ENE) gained $3.94 to $65.94 as it posted quarterly profit of 68 cents a share, topping estimates by 3 cents. CEO Kenneth Lay was all smiles as he said, "We expect 1999 to be another excellent year at Enron for both earnings growth and return to our shareholders."
Lastly, hog grower Harley-Davidson (HDI) accelerated $2.56 to $60.88 after reporting record first-quarter earnings of 38 cents a share, beating expectations by 2 cents. With sales of Harley motorcycles up nearly 21 percent from a year before, the company raised its full-year production target to 168,000.
Not bad for an outfit that was practically bankrupt 15 years ago. With the bulk of US purchases now being made by well-to-do young professionals, anyone want to dispute a direct link between Harley's success and the stock market's ongoing bull run?
