Blue-chip stocks took a spill late Tuesday afternoon as a brief rally gave way to nervousness that share prices won't be able to sustain such lofty levels. Tech shares rebounded just before the closing bell.
Trading was choppy throughout the session as investors mulled a profit warning from Gillette, not to mention the latest headlines out of Yugoslavia. After stocks began creeping back into record territory, many traders seized the opportunity to pocket some cash.
"The market has reached a manic stage," said Bill Meehan, chief market analyst with Cantor Fitzgerald. "People are taking some money off the table."
The Dow Jones Industrial Average fell 43.84 points to close at 9963.49, while the Wired Index was 5.63 higher at 671.90. The Nasdaq Composite Index gained 3.10 to 2563.16, and the S&P 500 was down 3.23 at 1317.89.
Meehan believes the market's volatility stems from the "narrowness" of investors' picks. "Everyone and their mother is trying to climb into technology stocks," he said. "There seems to be an almost insatiable appetite for these beauties."
The market will not be able to sustain broad-based momentum, Meehan observed, unless the wealth is spread a bit more evenly.
No wonder, then, that the slightest rustling of grass managed to unnerve the herd. Blue-chip stocks lost ground after Gillette said it expects to come up about a penny shy of first-quarter earnings estimates. The company's shares were promptly downgraded by Morgan Stanley Dean Witter and Donaldson, Lufkin & Jenrette.
As Gillette (G) tumbled 13 percent to US$50, investors grew nervous about the prospects for other leading lights in the household-goods sector. The Dow headed south as two of its components, Procter & Gamble (PG) and Johnson & Johnson (JNJ), slipped into the minus column.
International Business Machines (IBM) limited the Dow's decline for much of the day before eventually losing 50 cents to $183.44. Big Blue unveiled "the world's fastest" 64-bit, four-way Web server, intended as a mainstay for Internet service providers and e-commerce concerns. IBM also cut prices for other server models.
For its part, Dell Computer (DELL) advanced $2.75 to $46.81 as it voiced strong support for the Linux operating system. Not only will Dell offer Linux on certain PCs and servers, but it has bought a stake in Red Hat Software, which is spearheading development of a commercial version of the otherwise free-to-all operating system.
This, of course, was bad news for Microsoft (MSFT), which shed 88 cents to $94.06. Although Linux's growing popularity may be a factor in Redmond's efforts to settle its antitrust trial with the government, any threat to the dominance of Windows is a threat to Microsoft's market value.
Intel (INTC) rose $2.94 to $130.44 as Lehman Brothers noted the rapid pace of recovery in the chip industry. "A multi-year bull market is under way in semiconductor stocks," said analyst James Barlage. Advanced Micro Devices (AMD) gained 6 cents to $15.75, and Applied Materials (AMAT) was $2.19 higher at $67.94.
Yahoo (YHOO) dropped $4.25 to $214.88 even as it reached an accord with Micron Electronics for the firm's Millennia PCs to feature Yahoo online services. The portal's shares have climbed about 30 percent this week, due mostly to its $6 billion acquisition of Broadcast.com. Yahoo is expected to surpass profit estimates of 8 cents a share when it reports its first-quarter results on Wednesday.
Broadband is hot, and RealNetworks (RNWK) is riding the wave. The company's shares surged 27 percent to $195.44 after receiving a "buy" rating from DLJ. Analyst Jamie Kiggen said he expects RealNetworks' stock to reach $250 within a year.
Meanwhile, online community builder theglobe.com (TGLO) slid $1.38 to $54.75 after saying it will shell out nearly $53 million in stock for Attitude Network, operator of the Happy Puppy and Games Domain sites. Investors weren't thrilled that theglobe.com planned to assume about $5 million in debt as part of the deal.
Internet advertising firm DoubleClick (DCLK) jumped 27 percent to $121 after being handed a "strong buy" rating from CE Unterberg Towbin. And online retailer Netoy.com (NTOY) was up 30 percent at $9.44 as it inked a three-month advertising accord with DoubleClick.
TCI's John Malone was shuffling his deck again. TCI Music (TUNE) soared 253 percent to $29.56 on news that it will be merged with the online and interactive-TV assets of another Malone property, Liberty Media. The complicated deal involves Liberty's stakes in SportsLine USA, Priceline.com, and iVillage, and will result in TCI Music changing its name to Liberty Digital.
At the same time, News Corp. (NWS) advanced 13 cents to $33.94 after agreeing to purchase "substantially all" of Liberty Media's stake in Fox/Liberty Network for $1.4 billion. The deal will give Fox control of Fox Sports Net, plus the FX entertainment channel.
Lastly, Nextel Communications (NXTL) eased 44 cents to $39.19 amid speculation that the wireless-service provider will be purchased by MCI WorldCom (WCOM). On Monday, you'll recall, SkyTel Communications (SKYT) was up amid speculation the wireless-service provider will be purchased by ... MCI WorldCom.
Funny how rumors work.
