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Microsoft, CPI boost Dow
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June 14, 2000: 5:03 p.m. ET
Data soothes inflationary woes as investors sell techs and buy blue-chips
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - U.S. equity investors shifted money into "old economy" issues to push the Dow Jones industrial average higher Wednesday, amid fresh developments in Microsoft's antitrust case and the release of economic data showing consumer prices grew at a weaker-than-expected rate in May.
The Nasdaq composite index closed lower. Intel led the tech sellers that countered gains made in Microsoft.
"Some people are taking advantage of the run-up we've had in the last couple of days in tech land to regroup a little bit," said Art Hogan, chief market analyst at Jefferies & Co.
Bill Meehan, chief market analyst at Cantor Fitzgerald, agreed. "It may just be money being pulled out of technology and being put into more defensive sectors."
 The Dow posted solid gains, rising 66.11 to 10,687, while the Nasdaq was unable to recover from the selling pressure. The composite index fell 53.65 points, or more than 1 percent, to end the day at 3,797.41. The broader S&P 500 rose 1.10 to 1,470.54.
Some volatility may come ahead of Friday's "triple witching" options expiration, analysts said. Triple witching occurs when the futures market, cash market and options all expire on the same day. Analysts said this could lead to large buy and sell orders, as well as unwinding positions to shift cash allocations.
 Market breadth was mixed but volume remained weak. Advancing issues beat declining ones on the New York Stock Exchange 1,687 to 1,254, as more than 925 million shares changed hands. Decliners nudged out advancers on the Nasdaq 2,248 to 1,787, on volume of more than 1.3 billion shares.
In currency markets, the dollar weakened against the euro and the yen. Treasury securities edged higher.
Economic data encourage investors
Analysts said the day's economic reports painted a positive picture for investors.
"We had two excellent pieces of information on the economy," said Phil Orlando, chief investment officer at Value Line Asset Management. "The Fed is now confirming that the economy is slowing nicely."
The Consumer Price Index (CPI), the government's main inflation yardstick, rose 0.1 percent in May, the Labor Department said. That's below the 0.2 percent increase predicted by economists polled by Briefing.com but a shade above the flat reading registered in April. Excluding volatile food and energy costs, prices rose 0.2 percent, matching forecasts and April's 0.2 percent gain.
Linda Jay, a New York Stock Exchange floor trader with RPM Specialist, told CNNfn's Market Call she was surprised stocks didn't perform better after the CPI report. (467K WAV) (467K AIFF)
"The fact that it wasn't bad news was good news. If it was bad news, they certainly would have sold into it," said Michael Lyons, senior trader at Morgan Stanley Dean Witter. "But investors are nervous here. The money on the sidelines is coming in, but it's coming in slowly."
Financial stocks, often seen as interest rate sensitive, rose. J.P. Morgan (JPM: Research, Estimates) gained 1-13/16 to 131-3/8, Citigroup (C: Research, Estimates) advanced 1-13/16 to 67-1/8, and American Express (AXP: Research, Estimates) rose 2-3/8 to 56-7/8.
But the recent rise in oil prices was not reflected in the CPI and analysts said this may add to investor caution.
"The CPI was good news but still leaves that question mark about energy prices. The gasoline hike of the past three weeks was not included in it," said Peter Cardillo, research director at Westfalia Investments. But he also noted that if food prices fall during the month, an energy price rise could be offset in the next CPI report.
In other economic news, the Fed's Beige Book said the economy is slowing but inflation remains a concern. The report generally is used as a reference for officials in their deliberations about monetary policy and interest rates.
"There was no inflation in the CPI, the Beige Book was speaking to moderation in the economy and an attitude by investors that many stock prices have gotten attractive enough in the key sectors," said Joseph Battipaglia, chief investment strategist with Gruntal & Co.
After six interest rate hikes by the policy-making body of the Federal Reserve, investors have been looking for any shred of evidence that the economy is slowing and interest rate hikes may be coming to an end. The Federal Open Market Committee will hold its next meeting June 27-28.
"This is the first time we're going into a Fed meeting with an 'Are they or aren't they going to do it,' where the last one was 'How much are they going to raise it,' so there's caution," Morgan Stanley's Lyons said.
The market ignored the neutral comments on the economy made by San Francisco Federal Reserve president Robert Parry who spoke Wednesday in San Diego.
Corporate news
Microsoft (MSFT: Research, Estimates) surged 2-5/8 to 70-1/2 after the U.S. Court of Appeals agreed to hear the software maker's appeal in its antitrust case. The development was seen as a tactical victory for the company against the Justice Department, which wants the U.S. Supreme Court to review the case in an effort to speed up a final resolution.
Microsoft wasn't the only Dow component with positive developments that bolstered prices.
 SBC Communications (SBC: Research, Estimates) gained 1-3/4 to 49-3/4 after the state of Texas authorized it to market long-distance phone service.
And Eastman Kodak (EK: Research, Estimates) rose 1-1/2 to 60-1/4 after the photography firm said it's speeding up its share repurchase program and that it's on track to hit revenue and earnings goals.
Leading tech stocks fell on the Nasdaq. Among the decliners, Intel (INTC: Research, Estimates) shed 5-1/16 to 126-7/16 and Oracle (ORCL: Research, Estimates) dropped 2-11/16 to 79.
Seagram (VO: Research, Estimates) advanced 7-3/16 to 60-3/16 after France's Vivendi and Canal Plus said Wednesday they're in talks to acquire the Canadian entertainment and beverage company for around $37 billion in stock and debt.
 In earnings news, Bear Stearns (BSC: Research, Estimates) rose 1-3/8 to 42-1/4 after reporting fiscal second-quarter earnings of $1.40 per diluted share for the quarter ended May 26, up from $1.38 per share a year earlier, and beating the $1.26 per share consensus of analysts surveyed by First Call Corp. 
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