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Dow jumps 11,000 hurdle
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August 11, 2000: 4:55 p.m. ET
Investors pour money into blue chips; select tech buying lifts Nasdaq
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - The Dow Jones industrial average breached the 11,000 mark for the first time in nearly four months Friday as money flew into "old economy" issues amid investor confidence that blue-chip stocks would continue to perform well.
Financial and drug stocks, which rose today, have outperformed most of the technology sector year-to-date.
Bullish comments from Goldman Sachs about the tobacco industry lit a fire under tobacco maker Philip Morris. The rally sparked buying in other blue- chip stocks, such as Johnson & Johnson, Coca-Cola and J.P. Morgan.
"I think people are looking for good value in the market and they're finding it in 'old economy' stocks," said Alan Skrainka, chief market strategist at Edward Jones. "What these companies have in common is they're all viewed as great companies at a strong price that are not dependent on a slow economy."
 The Dow rallied 119.04 to 11,027.80, its highest level since April 25. The blue chip index is up 2.4 percent this week.
Meanwhile, the Nasdaq composite index reversed earlier losses as buyers put money into Oracle, WorldCom and Intel - all three companies sailed through the second-quarter with a positive outlook. But the index still was under pressure after Dell Computer reported softer-than-expected revenue.
 The Nasdaq gained 29.48 points to 3,789.47, but the index is just 2 points higher this week. The S&P 500 rose 11.59 to 1,471.84, and is up 3.1 percent this week.
Market breadth was positive. On the New York Stock Exchange, advancers beat decliners 1,921 to 929, as more than 837 million shares changed hands. On the Nasdaq, winners outpaced losers 2,101 to 1,783, as more than 1.3 billion shares were traded.
In currencies, the dollar was up against the euro but little changed versus the yen.
Investors cheer blue chips
Investors looking for value went shopping in the "old economy" camp and were rewarded.
"The Dow is faring much better. It's benefiting from a move in tobacco stocks," said Bill Meehan, chief market analyst at Cantor Fitzgerald. Explaining the momentum in the blue-chip index, he added, "It's just part of the rotation into some of the financials, some of the drugs, and consumer stocks."
The blue-chip index rallied after an influential analyst came out with positive comments about the tobacco industry, sparking buying in Dow component Philip Morris.
In a research note to clients, Goldman Sachs said tobacco stock valuations would improve significantly and reiterated its "recommended for purchase" rating for Philip Morris and said its shares could jump 50-to-60 percent by next year.
Philip Morris (MO: Research, Estimates) shares jumped 2-1/2 to 31; its 52-week high is 39-3/8.
 Other blue-chip "value" issues also rose. Johnson & Johnson (JNJ: Research, Estimates) gained 15/32 to 97-7/8, Coca-Cola (KO: Research, Estimates) rose 1-1/4 to 62-1/4, and J.P. Morgan (JPM: Research, Estimates) advanced 2-1/4 to 144.
Also helping the Dow was a stronger-than-expected retail sales report, which gave both Home Depot and Wal-Mart a boost.
The Commerce Department said that retail sales advanced 0.7 percent last month, more than economists' predictions of a 0.5 percent increase. Excluding autos, sales rose 0.6 percent, well above forecasts of a 0.2 percent gain.
Home Depot (HD: Research, Estimates) rose 13/16 to 55-15/16 and Wal-Mart (WMT: Research, Estimates) gained 9/16 to 51-9/16, its first gain in two sessions.
Dell punished, other techs reap buying
Analysts said the selective tech buying was filtering into companies that made it through the second quarter without any negative comments whatsoever.
"It's the companies that came through the quarter without any problems that are the ones reacting well and they're not as cyclical as some of the others," explained Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum.
Gains in Oracle, WorldCom and Intel trimmed the Nasdaq's earlier losses. Oracle (ORCL: Research, Estimates) gained 1-1/16 to close at 81-1/8, WorldCom (WCOM: Research, Estimates) advanced 5/16 to 33-11/16, and Intel (INTC: Research, Estimates) rose 1-13/16 to end the day at 63-13/16.
But analysts said investors were skittish about future revenue growth for the entire technology sector, and would continue to react quickly to any hints from tech firms that forward growth may be hindered.
"It looks like everything but tech is the name of the game," said Hyman. "We have a continuing rotation away from technology. People are absolutely concerned about valuations in technology and it is shown again in the Dell report."
A prime example came from Dell Computer (DELL: Research, Estimates), which fell 4-1/16 to 37-11/16 after it reported slightly better-than-expected second-quarter earnings, but also reported softer-than-expected revenue.
The company earned 22 cents a diluted share, beating forecasts by a penny and up from 19 cents a share in the year-earlier period. But the company's revenue of $7.67 billion was $200 million lower than analyst estimates and Dell's internal expectations.
 Analysts reacted cautiously to Dell's report. Donaldson Lufkin & Jenrette lowered its revenue estimates for fiscal 2001 but maintained a "market performance" rating. Lehman Brothers and ING Barings reiterated their "buy" rating, and UBS Warburg maintained a "hold" rating.
Economic data supports end to rate hikes
Investors continue to digest economic data that support the idea the Federal Reserve is finished with its interest rate hikes. And they are consistently rewarded with strong economic news.
Producer prices were unchanged in July from June, the Labor Department reported Friday, countering economists' forecasts of a 0.4 percent gain. Excluding food and energy costs, prices advanced at a 0.1 percent pace, a shade above forecasts of a 0.1 percent drop.
The Federal Reserve has hiked interest rates six times since June 1999 and analysts said the consensus is the tightening cycle is at an end. The Federal Open Market Committee, the Fed's monetary policy making body, meets next on Aug. 22.
"No one thinks the Fed is going to raise rates, so to what avail does a benign PPI number do to the market," said Art Hogan, chief market analyst at Jefferies & Co." 
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