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Stellar Dow week ends sour
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April 30, 1999: 5:28 p.m. ET
Inflation fears drown rally in blue chips; tech stocks manage to recover
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NEW YORK (CNNfn) - Strong economic data bearing the signals of rising inflation wreaked havoc on Wall Street, sending the stock market into a rally followed by a severe plunge and finally a moderate recovery by the end of the week.
The Dow Jones industrial average ended the day 89.34 points lower at 10,789.04, after reversing an early rally. Still, the blue chip index finished the week with a gain of 0.93 percent and is up 10.25 percent for the month and 17.51 percent for the year. The Dow climbed 1,0003 points in April.
Losers took the lead over gainers, 1,669 to 1,335, as trading volume on the New York Stock Exchange reached 941 million shares.
The pressure to consolidate before the weekend also took the edge off the morning's high-tech rally. But the Nasdaq Composite managed to recover, ending the day 14.42 points higher at 2,542.86. The S&P 500 index shed 7.65 points to 1,335.18.
The Nasdaq lost 1.85 percent for the week, but gained 3.31 percent for the month and is up 15.97 percent so far this year. The S&P 500 index fell 1.60 percent this week, but rose 3.79 percent in April for a year-to-date gain of 8.62 percent.
Much of the market's early strength came from news that the U.S. economy grew at a pace of 4.5 percent in the first quarter, more than a full percentage point above expectations. Strong economic growth has been the engine behind the Dow's recent powerful advance and the trend toward rotation into cyclical stocks that has dominated the market over the past two weeks.
But the unexpectedly robust GDP report knocked the wind out of the bond market, sending the bellwether 30-year Treasury bond down 1-29/32 points in price, its yield surging to 5.66 percent. The GDP price deflator, the key inflation component of the GDP report, also came in much higher than expected, rekindling fears of potential inflation and higher interest rates.
The severity of the bond market sell-off and the fear of rising interest rates eventually gave stock investors reason to lighten up their positions. The absence of many investors from the market ahead of the weekend also contributed to the volatility, said Clark Yingst, market analyst at Prudential Securities. (251K WAV) or (251K AIFF)
The dollar drew strength from the GDP report, rising against the yen and remaining firm against the euro after pushing that currency to a lifetime low.
Technology fever cools
After days of selling in the high-tech and Internet sector, investors found prices of technology issues attractive, driving them mostly higher at the end of a volatile session.
Among Dow components, IBM (IBM) rallied 4-3/8 to 209-3/16 and Hewlett Packard (HWP) gained 3/8 to 78-3/4.
Elsewhere among the tech leaders, Microsoft (MSFT) fell 3/4 to 81-5/16, Intel (INTC) inched up 3/8 to 61-3/16 and Cisco Systems (CSCO) climbed 4-7/8 to 114-1/16.
The volatile Internet sector also recovered at the end of the session that saw stocks in the Web-related business test both directions. In particular, Net investors once again bought shares of sector leaders America Online (AOL) and Amazon.com (AMZN), even after corporate earnings from both firms earlier in the week had failed to satisfy the market's increasingly demanding tastes. Shares of AOL rose 1-3/8 to 142-3/4 Friday, while Amazon climbed 3-13/16 to 142-3/4.
Among the biggest Web gainers, shares of Internet portal InfoSpace.com (INSP) soared 24-11/16, or almost 21 percent, to 143-5/16 after the company's revenue climbed 400 percent in the first quarter, even though operating losses came in at $705,000, or 3 cents per share.
Cyclicals up and down
Although a hot technology sector provided plenty of support for the Nasdaq, the performance of the Dow industrials were limited by profit taking among the cyclical manufacturing stocks that led the market upward Thursday.
Still, stronger-than-forecast earnings by industrial giant 3M (MMM) inspired investors and lifted the stock 3-3/8 to 89.
United Technologies (UTX) shares also rode the "up" escalator, climbing 11/16 to 144-7/8 after the manufacturer authorized a 2-for-1 stock split to take effect May 7.
Fellow Dow 30 industrials like Alcoa (AA) and Caterpillar (CAT), however, lost ground despite the GDP's promise of solid economic growth ahead. Shares of aluminum giant Alcoa extended their morning losses, falling 2-7/16 to 62-1/4, while Caterpillar shed 1-1/8 to 64-3/8.
Finance founders, oil sinks
The Dow's financial components, particularly susceptible to bond market fluctuations, drifted lower with Treasury bond prices. American Express (AXP) fell 4-11/16 to 130-11/16. Citigroup (C) slipped 1-7/16 to 74-7/8 and J.P. Morgan (JPM) closed off 3-1/4 at 134-3/4.
U.S. oil shares continued their contrarian motion, falling while other global oil stocks celebrated a fresh 16-month high in world crude prices.
Exxon (XON) lost 1-7/16 to 83-1/16 after Lehman Brothers joined other leading Wall Street firms in cutting the oil driller's outlook to "neutral" from "buy." Fellow black-gold blue chip Chevron (CHV) tumbled 3-13/16 to 99-3/4.
However, overseas oil shares got a boost from news that Spain's Repsol (REP) had launched a $13.4 billion cash takeover offer for Argentine oil firm YPF SA (YPF). American depositary receipts (ADRs) of YPF soared 5-7/8, or more than 16 percent, to 41-13/16, while Repsol ADRs gained 15/16 to 16-1/2.
(Click here for a look at today's list of CNNfn's market movers.)
(Click here for a look at today's CNNfn technology stocks report.)
-- by staff writer Malina Poshtova Zang with Robert Scott Martin
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