Not surprisingly, Wall Street was weaker Friday after posting record gains a day earlier. Share prices were firming a bit in mid-afternoon trading, but investors still seemed more interested in pocketing cash than in doing more shopping.
The setback probably would have been greater if the US Labor Department hadn't come out with some encouraging inflation news. The producer price index rose a mere 0.2 percent last month, suggesting that Greenspan & Co. won't feel any urgency to go and do anything rash, like jack up interest rates.
The Dow Jones Industrial Average shed 35.24 points to 10162.46 as components Chevron (CHV) and Union Carbide (UK) both had their ratings downgraded. Honestly speaking, no one really expected the blue-chip index to muscle its way much higher, at least not quite yet. Traders like to rewrite the record books only so much in the span of a few days.
Internet stocks, as usual, were performing in the center ring, and tech shares were doing their best to shake off the blahs. The Wired Index lost 11.14 points to 671.04, while the Nasdaq Composite Index was 6.99 higher at 2580.38. The S&P 500 was down 0.82 at 1343.16.
Remember all those dire warnings a few months back about how the PC business was entering a prolonged slump, and the disappointment surrounding Dell Computer's growth being not quite as awesome as in years past? Well, forget it. Many industry watchers had thought the gloomy forecasts were a bit overdone, and now The Wall Street Journal has arrived on the scene to confirm that, yes, PC makers are doing pretty well, thank you very much.
The computer industry should report mostly improved first-quarter results, fueled by double-digit revenue growth for servers, the Journal said. In fact, the only dark cloud on the horizon is a possible slowdown in sales due to the Y2K glitch, although that's been a convenient catch-all to explain sagging demand for everything from chips to software.
"Expectations were too high," said Bill Gorman, an analyst with PNC Asset Management, when asked why investors gave such a cold shoulder to PC stocks at the start of the year. "We got off to a lousy start in January. Then it got better in February, and then even better in March."
What a surprise. PC sales typically ease in the first quarter following the holiday buying bonanza. In fact, PC sales have been unusually robust over the past three months, and there's no reason to think that things will worsen in the near future. Gorman is predicting a 15 percent hike in unit sales for all of 1999.
Still, Dell (DELL) slid US$1.25 to $43.75 after saying it plans to focus more on the low-end PC market, where profit margins are slimmer. After unveiling its first sub-$1,000 models last month, the company said it intends to have "much more presence and aggressiveness" in the cheap seats, where Joe Consumer, as opposed to Joe Corporation, sits.
Compaq Computer (CPQ), meanwhile, advanced $1.13 to $30.75 after demonstrating its commitment to enterprise customers. The company said it had landed a $30 million order from Taiwan's Hon Hai Precision Industry, a parts maker. And IBM (IBM) was down $1 at $186 as it announced plans to be more active in hawking its PCs on the Web.
From the IPO front, USinternetworking (USIX) soared 157 percent to $54 on its first day of trading. The company, which allows clients to run business software over the Net, debuted with 6 million shares initially priced at $21 each. Its chief exec, Christopher McCleary, said USinternetworking shouldn't make a dime for at least a "few years."
For its part, Extreme Networks (EXTR) rocketed 214 percent to $53.50 after arriving with 7 million shares starting at $17 apiece. The maker of computer switches is seen as a relatively safe Internet play -- emphasis on "relatively" -- because its products are expected to be increasingly hot as demand grows for high-speed Net access. A poor man's Cisco, you could say.
