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Nasdaq breaks win streak
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July 18, 2000: 5:19 p.m. ET
Jump in CPI unnerves inflation-wary investors who ignore profits
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Nasdaq composite index fell for the first time in five sessions Tuesday as investors shrugged off a fresh batch of strong earnings reports to focus on news that inflation rose smartly in June.
The losses, which also sent the Dow Jones industrial average lower for a second straight day, came after the government's Consumer Price Index showed surprising increases last month. Those gains revived fears that a rise in prices, if sustained, could slow growth in the world's largest economy.
As the second-quarter reporting season ended its busiest day so far, a slew of solid profit reports failed to inspire investors. Many decided to lock in gains after a week-long stock market run-up.
Still, analysts saw little long-term significance behind the day's losses.
"One little pit stop in a Formula 500 race," Ash Rajan, senior vice president at Prudential Securities, told CNN's Street Sweep. "It's just profit taking."
 The Nasdaq fell 97.50 points, or 2.3 percent, to 4,177.17, after surging nearly 300 points during the last four sessions.
Meanwhile, the Dow dropped 64.35 to 10,739.92. Strong earnings from General Motors and Johnson & Johnson were not enough to offset losses in Intel, which posted financial results after the close of trading.
The S&P 500 shed 16.75 to 1,493.74.
Given the recent rally, Charles Payne, head analyst at Wall Street Strategies, said earnings would have had to be extraordinary to prevent a sell-off Tuesday.
"The (earnings) numbers are good but they are not great," Payne said. "The atmosphere is different (this week) in that the expectations are a bit higher."
 More stocks fell than rose. Declining stocks on the New York Stock Exchange outpaced advancing ones 1,684 to 1,166, as more than 908 million shares changed hands. Nasdaq losers beat winners 2,484 to 1,548, on trading volume of more than 1.4 billion shares.
In other markets, the dollar rose against the euro and yen. Treasury securities edged higher.
CPI shows strength
The CPI, the government's most closely watched inflation yardstick, jumped 0.6 percent last month, above the 0.4 percent rise expected by Wall Street. But the gains were mostly caused by a surge in the price of gas and oil, which rose above $30 a barrel last month.
Excluding energy and food costs, the core CPI gained just 0.2 percent, in line with forecasts.
 Analysts said the report by itself was not enough to persuade the Federal Reserve to raise interest rates next month. At the same time, if inflation gains become a trend, Fed officials may tighten credit.
Investors took this uncertainty as reason to sell stocks that surged over the last week.
"It gave sellers a chance to lighten up a bit," said Alan Ackerman, senior vice president at Fahnestock & Co. "On balance, this just appears to be investors taking a breather."
And John Chadwick, senior portfolio manager at Bessemer Trust, told CNNfn's market coverage that the Nasdaq, up more than 30 percent from its May low, was due for a break. (276 WAV) (276 AIFF)
The Fed, the nation's central bank, tightened credit six times since June 1999, bringing its benchmark lending rate to 6.50 percent. But recent signs have shown the economy cooling under the weight of higher borrowing costs. As such, some economists predict the Fed could be done or nearly done raising rates.
Earnings parade marches on
The blitz of earnings for the April-June quarter continued Tuesday, with four Dow components reporting results during the regular trading session. General Motors and Johnson & Johnson beat expectations, while Honeywell and Philip Morris met Wall Street's profit targets.
Still, technology stocks -- after a sharp run-up in the past few days -- suffered. Cisco (CSCO: Research, Estimates) lost 2-3/8 to 67-1/4, Oracle (ORCL: Research, Estimates) shed 1-15/16 to 74-3/16, and Intel (INTC: Research, Estimates) slid 3-5/16 to 143.
After the close of trading, Intel posted a profit of 50 cents per share, topping forecasts by a penny. Microsoft meanwhile, earned 44 cents per share in the period. That beat estimates of 42 cents per share. Microsoft (MSFT: Research, Estimates) gained 5/16 to 78-1/2.
In non-tech earnings, General Motors (GM: Research, Estimates) rose 7/16 to 60-13/16 after the automaker posted net income of $1.8 billion, or $2.93 a diluted share, above expectations of $2.82 a share.
 Johnson & Johnson (JNJ: Research, Estimates) said its second-quarter profit rose to 94 cents a share, 2 cents above Wall Street forecasts. Shares of the maker of Tylenol and Band-Aids gained 17/32 to 94-78.
And Honeywell (HON: Research, Estimates) fell 7/8 to 36-7/8 after saying it earned $605 million, or 75 cents a diluted share, in the second quarter. The results met lowered forecasts.
(Click here for a comprehensive look at the day's earnings.)
Some of Tuesday's most stunning results came from Merrill Lynch. The nation's biggest broker reported net earnings of $902 million, or $2.01 a share, up from $673 million, or $1.57 a share, a year earlier. That soundly beat the $1.70 consensus forecast of analysts surveyed by earnings tracker First Call.
But investors sold the stock, sending Merrill shares down 1-29/32 to 130-1/16.
One company that really didn't please Wall Street was Aetna (AET: Research, Estimates). Shares of the insurer tumbled 6-15/16 to 59-11/16 after it warned it expects second-quarter earnings of 85 cents-to-95 cents a share, well below forecasts of $1.20 a share.
In addition to corporate results, investors have one more major event to get through this week. That's Federal Reserve Chairman Alan Greenspan's scheduled testimony before the Senate Banking Committee Thursday. Investors will be listening to the world's most powerful banker for clues on the direction of borrowing costs, which have moved higher for the last 13 months. 
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