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Nasdaq surges ahead
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April 27, 2000: 5:06 p.m. ET
Money flows into tech stocks seen immune to higher rates; Dow falls
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Nasdaq composite index surged nearly 4 percent Thursday as investors snapped up technology companies posting solid quarterly results.
But fears of rising interest rates hit the Dow Jones industrial average, home to many companies sensitive to tighter credit.
Those fears emerged after fresh government data showed employment costs surged and prices rose strongly in the first three months of 2000, triggering concerns that Federal Reserve inflation fighters still have a lot of work to do.
"The fear here is the economy is overheating," William Sullivan, money market economist at Morgan Stanley Dean Witter told CNN's Street Sweep. "And this points to a Federal Reserve with a much tighter monetary policy."
But shares in many technology companies, less dependent on banks for raising money, edged higher.
 "The earnings have been tremendous," Donald Selkin, chief investment strategist at Joseph Gunnar, said of Nasdaq stocks. "We are going to see a shift back to 'new economy' stocks because they are less rate sensitive."
That was clearly the case Thursday, with the Nasdaq jumping 143.96 points to 3,774.04, more than reversing Wednesday's 81.14-point slide.
Selkin is also heartened by technical factors, saying the Nasdaq's intraday lows keep climbing from previous bottoms, suggesting the worst may be over for the index, which has fallen steadily for much of April.
The Nasdaq has under-performed the Dow this year. But not Thursday. The index of 30 blue chip stocks shed 57.40 to 10,888.10, extending the previous session's 179.32-point loss.
The broader S&P 500 rose 3.93 to 1,464.92.
Still, declining issues on the New York Stock Exchange beat advancing ones 1,607 to 1,303 as volume reached 1 billion shares. But Nasdaq winners edged out losers 2,113 to 1,957 as more than 1.5 billion shares changed hands.
 In other markets, Treasury securities fell. The dollar rose against the euro, sending the regional currency to a lifetime low. But the U.S. currency finished little changed against the yen.
Tech shows strength
Strong earnings lifted technology stocks Thursday. Among them, MCI Worldcom (WCOM: Research, Estimates) surged 4-1/2 to 45-3/8. The No. 2 long-distance telephone provider said net income for the first quarter rose to $1.3 billion, or 44 cents a share, beating forecasts by a penny.
JDS Uniphase (JDSU: Research, Estimates) jumped 5-3/4 to 97-3/4. The maker of fiber-optic equipment posted strong results late Tuesday.
And Ericsson (ERICY: Research, Estimates) surged 8-9/16 to 89-9/16. The mobile phone maker got a lift after rival Nokia posted a 55 percent rise in first-quarter net income.
The three companies are hardly unusual. Technology firms in the S&P 500 have reported first-quarter profit growth that's averaging 32 percent above year-earlier figures, according to First Call /Thomson Financial.
 (Click here for a comprehensive look at the day's earnings.)
A closely watched tech debut also fared well. AT&T Wireless (AWE: Research, Estimates) gained 2-5/16 to 31-15/16, after being priced at $29.50 per share late Wednesday. AT&T's spin-off raised $10.6 billion, the largest IPO in history.
GDP, ECI hit stocks
As first-quarter earnings season sprints to a close, fresh evidence emerged that the strengthening economy is generating inflation, shifting some focus to the Federal Reserve
Employment costs rose at a 1.4 percent annual rate in the first quarter, the Labor Department reported, above economists' predictions of a 0.9 percent increase, according to a Briefing.com poll.
Separately, the Commerce Department said its gross domestic product price deflator, a key measure of inflation, jumped 2.7 percent in the quarter, surpassing the 2.3 percent pace expected by economists. Overall, GDP grew at a 5.4 percent annual rate.
"The economy is way too hot and is generating inflation pressure," Alan Skrainka, chief market analyst at Edward Jones, told CNNfn's market coverage. "And the Fed is going to have to address it with higher interest rates."
Analysts said the figures are sure to prompt the central bank to keep raising interest rates to keep the strong growth from generating runaway inflation.
 Jon Burnham, chairman and chief executive of Burnham & Co., told CNNfn's
Talking Stocks that fear of Fed action could curb any market's gains in the near term. (355K WAV) (355K AIFF).
Financial stocks, considered most affected by higher interest rates, fell, hurting the Dow. J.P. Morgan (JPM: Research, Estimates) lost 3-3/16 to 131-3/8 and Citigroup (C: Research, Estimates) slipped 3/4 to 61-9/16 
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