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Dow in post-11,000 slump
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May 4, 1999: 5:18 p.m. ET
Stocks lose ground as investors cash in on record rally and worry about rates
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NEW YORK (CNNfn) - Wall Street suffered a beating Tuesday, a day after the Dow industrials made their way through the 11,000 barrier.
Profit taking and interest rate concerns drove the market lower, as bonds fell and inflation fears resurfaced.
The Dow Jones industrial average shed 128.58 points, or 1.2 percent, to 10,886.11. The Dow's retreat eventually influenced the broader market. On the New York Stock Exchange, declines took the lead over advances 1,586 to 1,401, as trading volume reached 933 million shares.
"The market was due for a rest 1,000 points ago," said Robert Stovall, president of Stovall 21st Advisers. (216K WAV) or (216K AIFF)
After a morning basking in the attention of bargain hunters, the technology-heavy Nasdaq Composite retreated again, losing 50.46 points, or almost 2 percent, to 2,485.12. The S&P 500 index dropped 22.63, or 1.7 percent, to 1,332.00. Transportation stocks, however, ignored the selling in the broader market, and the Dow transports index rallied 35.29 points to 3,713.88, adding to its record high from Monday.
The bond market's losses deepened after bond prices dipped below key levels of support in the absence of much economic data or other incentives to buy bonds. The bellwether 30-year Treasury bond fell 25/32 of a point in price, while the yield soared to 5.71 percent, a level not seen since late July.
Major Wall Street broker Merrill Lynch poured lighter fluid on the bond-selling fires by cutting the weighting of bonds in its model portfolio to 30 percent from 50 percent, expanding its cash allotment to 30 percent to compensate. Although the broker left its stock weighting unchanged at 40 percent, it warned that stocks run the risk of becoming overvalued.
The dollar, however, climbed sharply against the yen as confidence in Japan's economic restructuring plans waned. The dollar fell back against the euro, which got support from comments by Wim Duisenberg, the European Central Bank president.
Banks hesitate, airlines fly
In stocks, the bond market's profound weakness rekindled fears that higher interest rates could be lurking just around the corner. These concerns, in turn, encouraged investors to lighten their holdings in the rate-sensitive financial sector.
Dow financial firm American Express (AXP) slid 6-1/4 to 127-1/8, while fellow blue-chip Citigroup (C) fell 2-3/4 to 72-1/4 and J.P. Morgan (JPM) slipped 3-7/8 to 133-1/2.
On the other hand, transportation stocks and other economically sensitive cyclical shares pushed deeper into the stratosphere as traders bet on economic expansion ahead.
Transportation stocks, however, extended their rally into record territory. Airline stocks led the way, with Delta Air Lines (DAL) shares jumping 1-13/16 to 66-1/16 and US Airways (U) climbing 2-7/16 to 57-1/16. American parent AMR (AMR) rose 2-1/2 to 72-1/16. Rail freight giant CSX (CSX) provided ground support, climbing 1-3/4 to 53-7/16.
Transportation analyst Susan Donofrio at BT Alex. Brown said the airline sector was getting a boost from air giant Continental (CAL), which reported that the ratio of paying passengers to seats reached its highest level ever in April. Continental also announced plans to slow down its fleet expansion next year. Continental shares climbed 2 to 47.
Techs prove unsteady
After blowing hot and cold in recent days, the fickle technology sector dipped back into the red Tuesday as profit takers gained the upper hand in their battle with bargain hunters.
Microsoft (MSFT) shares slipped 1-13/16 to 78-1/16, and Cisco (CSCO) shed 5 to 108-5/8, while Intel (INTC) eased 1-7/16 to 61-11/16. Among the computer makers, Dell (DELL) sagged 1-1/4 to 40-13/16 and Gateway (GTW) fell 1-1/8 to 66, but Dow member IBM (IBM) added 1/4 to 212.
Art of the deals
Despite Wall Street's choppy sentiments, a series of large-scale corporate mergers and a massive big-name IPO kept investors abuzz and helped lift the stocks of some of the companies involved.
Shares of Wang Global (WANG) surged 3-1/8, or more than 12 percent, to 28-5/8 on news the company has found itself a buyer in Dutch information technology heavyweight Getronics. Early Tuesday, Wang said Getronics had agreed to pay $2 billion to acquire the computer services firm.
In the day's other big acquisition, shares of biotech firm Centocor (CNTO) rallied 2-1/4 to 49-1/8 following a Wall Street Journal report that Johnson & Johnson (JNJ) is in talks to buy the company.
The biggest of the day's deals was unquestionably the second-biggest initial public offering of all time, the $3.65 billion debut of venerable Wall Street investment banker Goldman Sachs (GS). Shares of the 130-year-old financial firm soared 17-3/8, or nearly 33 percent, to 70-3/8 from their $53 starting price.
(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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