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Dow scores a record
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January 7, 2000: 5:52 p.m. ET
U.S. stocks end sharply higher; Nasdaq recovers amid bargain hunting
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - U.S. blue chips soared to a record close Friday, finishing above 11,500 for the first time and bolstered by solid gains among Dow components Procter & Gamble, Wal-Mart Stores and Merck.
"There was plenty of cash on the sidelines. As soon as it became evident that the correction in the Nasdaq was over this morning, investors put money to work in a more broader array of industries,” said Bob Wahlberg, chief equity analyst at briefing.com.
The Dow Jones industrial average rallied 269.30 points, or 2.4 percent, to 11,522.56, surpassing its previous record close of 11,497.12 on Dec. 31.
In addition, the index achieved its fifth largest one-day point gain in its history Friday, and finished the week with a gain of 0.21 percent.
The Nasdaq composite regained its footing after a three-day slump, rising 155.49 points, or 4.2 percent, to 3,882.62, representing the largest one-day point gain in its history.
However, the Nasdaq declined 4.58 percent this week, the worst weekly point loss in its history.
The S&P 500 index advanced 38.02, or 2.7 percent, to 1,441.47. The index fell 1.88 percent for the week.
Breadth was positive on the New York Stock Exchange, with gainers widely beating losers 2,265 to 854. Trading volume reached a near-record 1.2 billion shares.
Treasury prices were little changed, with the benchmark 30-year bond flat in price, its yield unchanged from 6.55 percent late Thursday.
In the currency markets, the dollar rose against both the yen and the euro.
Wal-Mart, P&G boost the Dow
Wal-Mart Stores (WMT), the world's No. 1 retailer, contributed to the blue chip indicator’s surge. The stock jumped 4-13/16 to 68-1/2 after the company said late Thursday it would team with venture capital firm Accel Partners to create an independent company, Wal-Mart.com.
Retailer The Home Depot (HD), a recent addition to the Dow industrials, also did well, gaining 2-13/16 to 62-13/16.
Among the leading sectors was pharmaceuticals. Dow component Merck (MRK) jumped 6-9/16, or nearly 10 percent, to 74-15/16.
Other top performers in the Dow industrials included Procter & Gamble (PG), rising 8-5/8 to 116-1/2 and Coca-Cola (KO), advancing 3-3/4 to 60-3/4.
Techs regain momentum
The technology sector advanced after a sell-off that saw the tech-heavy Nasdaq composite index plunge nearly 10 percent from Monday’s record high of 4,131.15 going into Friday’s opening. A decline of 10 percent from an index’s high is usually considered a market correction.
"In the last couple of days, we saw widespread fear in the Nasdaq. Now we are seeing the return of greed,” said Hugh Johnson, chief investment officer at First Albany. "Bargain hunting started the ball rolling.”
"It’s a relief. So many stocks were down so much, it was time for investors to buy them again,” said Charles Payne, head analyst at Wall Street Strategies.
Lucent Technologies (LU), the nation’s largest maker of telecommunications equipment, remained under pressure Friday after warning late Thursday that its fiscal first-quarter income will be below analysts’ forecasts.
The stock traded at 53-3/4, well below its close of 69 at the end of regular trading hours Thursday, but 1-3/4 above the price at the end of after-hours trading. It was the most actively traded stock on the New York Stock Exchange, with volume at 179 million shares.
Following Lucent’s warning, several Wall Street brokerage firms downgraded the stock, including both Salomon Smith Barney and SG Cowen, which lowered their rating to "neutral” from "buy.” Merrill Lynch downgraded the stock to "near-term neutral” from "near-term accumulate.”
The announcement from Lucent follows two other warnings this week within the tech sector. Gateway (GTW) said its fiscal fourth-quarter sales would fall below analyst expectations and business-software maker BMC Software (BMCS) forecast disappointing fiscal third-quarter earnings.
Gateway rebounded 2-5/8 Friday to 61-5/8, but BMC fell 1-5/8 to 43-1/8.
Despite Lucent’s warning, other communication technology issues were positive. Cisco Systems (CSCO) rose 5-7/8 to 105-7/8, and Nortel Networks (NT) surged 20-1/4, or more than 26 percent, to 97-1/4.
Nortel said late Thursday it remains positive on its earnings outlook for 2000. Following the announcement, SG Cowen upgraded the stock to "strong buy” from "buy.”
"It is encouraging that the market absorbed Lucent’s earnings warning without breaking down,” briefing.com’s Wahlberg noted.
One facet of the technology sector performing especially well is business-to-business e-commerce, companies that facilitate the processing of online transactions. These companies are drawing attention in the wake of several reports indicating strong Internet sales this past holiday season.
Among the business-to-business e-commerce winners, Ariba (ARBA) jumped 19-1/16, or nearly 13 percent, to 169-3/16 and Oracle (ORCL) added 7-3/8 to 103-3/8. However, Commerce One (CMRC) gave back the day’s gains, slipping 7/8 to 187-1/2.
Some bargain hunting
Analysts said investors took advantage of lower prices across the board following the market’s sharp decline Tuesday, in which the three major indexes each fell more than 3 percent.
"There are real bargains out there; it’s difficult to fight off the bargain hunters,” said Art Hogan, chief market analysts at Jefferies & Co. "There is a great deal of money on the sidelines wanting to get put to work into the marketplace. Today is the day.”
Charles Betz, portfolio manager for Cornerstone Capital Management, said a turnaround was due. (159K WAV) (159K AIFF)
But not everyone sees an end to the weakness that marked the tech sector, as Barry Hyman, chief market strategist for Ehrenkrantz King Nussbaum, told CNNfn. (174K WAV) (174K AIFF)
Investors discount strong jobs report
Investors largely shrugged off a stronger-than- expected December U.S. employment report suggesting the labor market remains tight, which may prompt the Federal Reserve to increase interest rates in order to keep inflation in check.
The U.S. economy added 315,000 new jobs in December, according to the Labor Department. The number was well above economists’ expectations of a 225,000 gain.
"The report was strong, but it was not supercharged to the point the Fed will have to be more aggressive in February,” said Jeff Palma, U.S. economist at Warburg Dillon Read.
Ronald Hill, equity strategist for Brown Brothers Harriman, told CNNfn investors are holding back from selling stocks while awaiting other signs that inflation is increasing. (297K WAV) (297K AIFF)
The average hourly wage, which rose 6 cents to $13.46 an hour, also was a larger-than-expected increase. This component, a measure of inflation, is said to be closely watched by Federal Reserve Chairman Alan Greenspan. The next Fed policy meeting is scheduled for Feb. 1 and 2.
(Click here for a look at today’s CNNfn hot stocks.)
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