Wall Street was little changed in mid-afternoon trading Tuesday as investors finally decided the time was ripe to pocket some cash from record gains over the past few sessions.
The Dow Jones Industrial Average fell 10.27 points to 10329.24 after earlier piercing the 10400 level for the first time. The blue-chip index found its initial strength in better than expected earnings reports from Merrill Lynch (MER) and Paine Webber Group (PWJ), which buoyed financial stocks.
Tech stocks lost ground amid continued jitters over a profit warning from Compaq Computer, plus new worries that Intel may disappoint when it posts its first-quarter income after the closing bell. The Wired Index gained 2.09 to 686.03, while the Nasdaq Composite Index was 17.72 lower at 2581.09. The S&P 500 dropped 13.35 to 1345.29.
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, the rally soon petered out as investors succumbed to a bout of altitude sickness. Tech stocks descended first, and the rest of the market eventually followed suit.
"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 are especially keen to see the numbers Intel puts up. Income of at least 55 cents a share is anticipated, but investors may make their disappointment known if the chipmaker doesn't perform significantly better -- despite the slugfest taking place at the low end of the semiconductor market.
Intel (INTC) slipped 63 cents to US$60.63 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 was unchanged at $15.06.
"Intel still has no real competition," Jefferies' Hogan observed. "Its rivals, like Advanced Micro Devices, continue to disappoint."
Elsewhere in tech, Cisco Systems (CSCO) fell $2.88 to $114.88 after the company said 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 28 percent to $56.50.
Netwise, the good news from Merrill Lynch and Paine Webber, kept online brokers on the ascent. ETrade Group (EGRP) rose 21 percent to $116.25, and Ameritrade (AMTD) was up 16 percent at $164.75. Even Charles Schwab (SCH), which tends to lag its exclusively electronic cousins, was $9.75 higher at $144.75.
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 25 percent to $198 after announcing a three-for-one split. It expects to have as many as 55,000 accounts registered by the end of the year.
Similarly, Virtuallender.com (VLDC), an online mortgage service, soared 59 percent to $14.88 after unveiling a tie-up with Net.B@nk that will allow it to process applications faster. At this rate, online financial institutions will soon overtake porn as the Web's biggest money spinner.
