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Nasdaq soars to record
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February 17, 2000: 5:31 p.m. ET
Biotechs push index to record close, volume; Dow slips on Greenspan
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - The Nasdaq composite index staged a strong rally Thursday, closing above the 4,500 mark for the first time as gains among biotechnology issues and its key tech components fueled the index to a record.
"Techs are back with a big vengeance. People continue to chase momentum," said Brian Conroy, head of listed trading at J.P. Morgan.
But testimony from Federal Reserve Chairman Alan Greenspan that strongly hinted of further interest rate hikes weighed on the Dow Jones industrial average.
The Nasdaq composite index rallied 121.22 points, or 2.7 percent, to 4,548.87, surpassing its previous record close of 4,485.63 on Feb. 10. Volume on the Nasdaq also set a record at 2 billion shares.
The Dow Jones industrial average fell 46.84 to 10,514.57, while the broader S&P 500 edged up 0.58 to 1,388.25. Small-cap stocks performed well, with the Russell 2000 Index of Small Stocks posting a record close for the second consecutive session at 558.42.
 Breadth was negative on the New York Stock Exchange, with declines outnumbering advances 1,570 to 1,440 on trading volume of 1 billion shares.
On the Nasdaq, gainers led losers 2,324 to 1,877.
In other markets, Treasury prices were mixed, with the 30-year bond gaining 17/32 of a point, lowering its yield to 6.22 percent from 6.25 percent late Wednesday. The dollar rose against the yen and fell against the euro.
Upward surge on Nasdaq
Technology stocks continued their upward movement Thursday as robust gains among biotechnology stocks underpinned the Nasdaq. The composite index has had a good year, gaining nearly 12 percent, while the Dow Jones industrial average has fallen more than 8 percent.
Analysts said one of the sector's strengths is its resilience to interest-rate concerns. "It's a momentum game. The opinion is that interest rates don't matter to these companies (the biotechs)," said Bill Meehan, chief market analyst at Cantor Fitzgerald. "They don't tap the credit markets."
Biotech companies use advanced biochemistry to discover new treatments for a wide variety of illnesses, and are often smaller and less established than the pharmaceutical leaders. Among the top performers, Human Genome Sciences (HGSI: Research, Estimates) surged 29-9/16, or more than 15 percent, to 217-9/16, and Amgen (AMGN: Research, Estimates) advanced 2-7/8 to 72-3/4.
Barry Hyman, senior equity analyst for Ehrenkrantz King Nussbaum, told CNNfn's Talking Stocks there is a frenzy for these issues that rivals the one that boosted Internet issues in recent years.
"Right now, it's a search for names, just like it was in the Internet sector, where you started with the big-cap ones and then you went to the smaller- cap ones," Hyman said.
Strength among the Nasdaq's key components also lifted the index. Cisco Systems (CSCO: Research, Estimates) rose 3-11/32 to 130-1/2, Dell Computer (DELL: Research, Estimates) climbed 2-11/16 to 40-11/16, Intel (INTC: Research, Estimates) gained 2-13/16 to 110, Microsoft (MSFT: Research, Estimates) added 2 to 99-5/8, and MCI WorldCom (WCOM: Research, Estimates) advanced 1-5/16 to 49-1/4.
 But keeping the Nasdaq in check was DoubleClick (DCLK: Research, Estimates). Shares of the online advertising firm tumbled 15-3/4, or nearly 15 percent, to 90-3/4 after the Federal Trade Commission began an inquiry into its business practices.
Vince Farrell, chairman of Spears Benzak Salomon & Farrell, told CNNfn's Street Sweep, the tech sector is due for a breather. (211K WAV) (211K AIFF)
J.P. Morgan's Conroy said it difficult to be bullish about the sector, referring to the price-to-earnings ratio of many such stocks. "The valuation disparities are historic. It can't continue this way," he said.
Greenspan testimony weighs
Federal Reserve Chairman Alan Greenspan's semi-annual Humphrey-Hawkins testimony before the House Banking Committee pressured the Dow industrials. The Fed chief, in prepared remarks, spoke about mounting imbalances in the economy and the risks of rising inflation.
"Profoundly beneficial forces driving the American economy to competitive excellence are also engendering a set of imbalances that, unless contained, threaten our continuing prosperity," Greenspan said.
Due to a booming U.S. economy, the central bank raised short-term interest rates four times since last June in order to keep inflation under control. Analysts largely expect the central bank to hike rates again by a quarter percentage point when it meets on March 21.
"Greenspan is saying they (the Fed) haven't raised rates enough. It leaves the impression out there that one more rate hike won't be enough," said Jim Benning, trader at BT Brokerage.
Hurting the Dow was Hewlett-Packard (HWP: Research, Estimates), falling 4 to 127. The world's No. 2 computer company late Wednesday reported fiscal first-quarter earnings of 80 cents per diluted share, beating expectations by 2 cents. The company was the last blue-chip component to report earnings.
Following the earnings report, numerous Wall Street brokerage firms raised their price targets on the stock, and Deutsche Banc Alex. Brown upgraded the stock to "strong buy" from "buy."
Some interest-rate sensitive issues, including financial and retail stocks, fell sharply. Among the Dow negatives, American Express (AXP: Research, Estimates) declined 5-29/32 to 147-15/16, Citigroup (C: Research, Estimates) eased 1-1/8 to 52-1/2 and Wal-Mart Stores (WMT: Research, Estimates), the world's largest retailer, slumped 3-3/4 to 49.
Coca-Cola (KO: Research, Estimates) also weakened the blue-chips, falling 1-1/4 to 52-5/16 after the soft drink maker's new chairman, Douglas Daft, took control of the company ahead of schedule.
A tame PPI
Earlier in the session, investors reacted favorably to a government report that suggested inflation remained in check. The U.S. producer price index (PPI), which measures inflation at the wholesale level, was flat in January, according to the Labor Department. The number was below the 0.1 percent gain economists forecast. In addition, the core rate, which excludes volatile food and energy prices, declined 0.2 percent.
"This [the report] is confirmation that inflation remains well balanced," said Patrick Dimick, senior U.S. economist at Warburg Dillon Read.
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