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Nasdaq posts record again
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February 7, 2000: 6:17 p.m. ET
U.S. stocks end mixed as investors favor tech issues; Dow falls over rate jitters
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - The Nasdaq composite index posted its second consecutive record close Monday as strength among technology stocks, particularly biotechnology shares, fueled gains.
Meanwhile, the Dow Jones industrial average ended lower as investors' concerns about rising interest rates continued to pressure the blue-chip index.
"It's the same story. Technology is hot, and everything else is not," said Alan Skrainka, chief market strategist at Edward Jones.
The Nasdaq composite index rose 77.63 points, or 1.8 percent, to 4,321.77, surpassing Friday's all-time high close of 4,244.14.
The Dow Jones industrial average fell 58.01 to 10,905.79. The index was down as much as 117. The S&P 500 index inched down 0.15 to 1,424.22.
On the New York Stock Exchange, declines outnumbered advances 1,783 to 1,238 as trading volume reached 917 million shares. On the Nasdaq, advances led declines 2,354 to 1,853, on volume of 1.61 billion shares.
Treasury prices fell sharply, with the benchmark 30-year bond losing nearly a full point, raising its yield to 6.34 percent from 6.27 percent late Friday.
The dollar rose against both the yen and the euro.
Techs continue eventful ride
Investors' appetite for technology stocks appeared unabated as the Nasdaq composite index continued to outperform the broader market Monday. The index posted six consecutive session gains and added a phenomenal 9.2 percent last week. Analysts were extremely bullish about the technology sector.
"These well-known name stocks have momentum. The money keeps flowing in. Those traders are unconcerned about the gold market," said Doug Myers, vice president of equity trading at Wachovia Securities.
The red-hot biotechnology sector staged a strong performance Monday. These companies use advanced biochemistry to discover the next generation of treatments for a wide variety of illnesses. They are often smaller and less established than the pharmaceutical leaders.
Shares of MedImmune (MEDI: Research, Estimates), which develops drugs for transplants and infectious diseases, jumped 12-5/8, or nearly 10 percent, to 142-1/16 after Salomon Smith Barney upgraded the stock to "buy" from "outperform."
Aurora Biosciences (ABSC: Research, Estimates) also performed well, surging 11-1/2, or nearly 24 percent, to 59-3/4. The company announced it would sell 1.8 million shares in a private placement. Following the announcement, Deutsche Banc Alex Brown raised its price target on the stock to 83 per share from 44.
The largest of the biotech companies, Amgen (AMGN: Research, Estimates) gained 4-9/16 to 69-3/16.
Supporting the blue chips was Dow component Hewlett-Packard. The world's No. 2 computer company extended Friday's gains, jumping 10-3/8 to 128-3/8 after Salomon Smith Barney increased its first-quarter earnings estimate to 79 cents per share, citing strong business in Asia.
But Richard Cripps, chief market strategist at Legg Mason, told CNNfn's market coverage that investors need to be prepared for a bumpy ride in the next few months. (191K WAV) (191K AIFF)
Cyclicals weigh on blue chips
Investors expressed concern about rising interest rates. Last Wednesday, the Fed increased short-term rates by a quarter point. Due to a U.S. economy that shows no signs of a slowdown, the central bank strongly hinted of future rate hikes.
"The market is negative short-term. We are locked in a trading range until the next Fed meeting," said Peter Green, technical strategist at Gruntal & Co., referring to the meeting of Fed monetary policy makers March 21.
Cyclical stocks, which tend to be sensitive to changes in the economy, were on the skids. Among the Dow components, Alcoa (AA: Research, Estimates) retreated 2-3/8 to 68-1/8, International Paper (IP: Research, Estimates) declined 1-1/16 to 44-9/16, and Minnesota Mining and Manufacturing (MMM: Research, Estimates) fell 1-7/16 to 87-5/8.
"Cyclicals are easing off with higher interest-rate concerns," said Peter Coolidge, senior trader at Brean Murray & Co. "Money is flowing out of the blue chips. There is a lot of interest in techs and not cyclicals."
Nevertheless, Coolidge was not concerned with the market divergence. "I wouldn't make a big deal out of it," he added.
In addition to interest-rate jitters, investors expressed caution as strength in gold continued, with prices at four-month highs Monday. Analysts noted higher commodities are a signal of inflation.
"The recent rally in gold is a further sign that the recent period of disinflation is over and that inflation will be notching higher," said Tony Crescenzi, senior market strategist at Miller Tabak Hirsch & Co.
Roy Blumberg, portfolio manager at Sheer Asset Management, told CNNfn's market coverage that investors can continue to expect divergent markets in the first half of 2000.
Merger activity heats up
Merger news dominated investors' attention Monday. The pharmaceutical sector was in the spotlight after Pfizer (PFE: Research, Estimates) agreed to acquire Warner-Lambert (WLA: Research, Estimates) in a deal valued at approximately $90 billion.
The takeover completes a three-month-long takeover battle in which Pfizer foiled the effort of American Home Products (AHP: Research, Estimates) to merge with Warner-Lambert. AHP will receive a $1.8 billion break-up fee for withdrawing its bid.
The deal creates the world's second-largest drug company. Pfizer rose 15/16 to 36-11/16, Warner-Lambert advanced 2-9/16 to 97-1/8, and American Home Products gained 2-15/16 to 48-7/16.
In other merger news, EarthLink Network's (ELNKD: Research, Estimates) $4 billion marriage with competitor MindSpring Enterprises became effective Monday, creating the nation's No. 2 Internet service provider, behind America Online (AOL: Research, Estimates).
EarthLink posted better-than-expected fourth-quarter results Monday. The results, which reflect the merger, include a loss on operations of 22 cents per share. Earnings tracker First Call forecast a 32 cents a share loss.
EarthLink, trading under a temporary symbol, ended at 31-7/16 against MindSpring's Friday close of 30-1/2. Rival AOL slipped 9/16 to 57-1/4.
Lifting the Nasdaq was Silknet Software (SILK: Research, Estimates). The maker of customer service software agreed to merge with Kana Communications (KANA: Research, Estimates) in a stock deal worth $4.2 billion. Silknet's shares soared 44-13/16, or more than 32 percent, to 183-5/16. However, Kana, an Internet communications provider, fell 18-3/8 to 240-1/2.
Cisco Systems (CSCO: Research, Estimates) also contributed to gains, rising 4-1/16 to 125-3/16. The company, a leading network provider, is scheduled to report earnings after the market close Tuesday.
But weighing on the Nasdaq was Ortel (ORTL: Research, Estimates). Shares of the telecommunications company retreated 9-1/16 to 168-1/16 after Lucent Technologies (LU: Research, Estimates) agreed to acquire it for $2.95 billion. Lucent, North America's leading maker of telecom equipment, dipped 1 to 56.
Among individual issues, Dow component General Electric (GE: Research, Estimates) fell 5-1/16 to 136-1/2 despite being named "America's most admired company" by Fortune magazine for the third consecutive year.
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