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Hesitation on Wall Street
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February 16, 1999: 5:37 p.m. ET
Blue chips follow bond market higher, tech stocks suffer more valuation woes
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NEW YORK (CNNfn) - Investors returned to Wall Street from a three-day holiday weekend in a mixed mood Tuesday - taking a bond market rally as a signal to buy blue chip stocks, yet still showing signs of unease about valuations and earnings growth among high technology issues.
The Dow Jones industrial average finished up 22.14 points at 9,297.03. On the New York Stock Exchange, declines barely beat advances 1,541 to 1,522 as 654 million shares changed hands.
The Nasdaq Composite, last week's most volatile market index, had another roller-coaster ride. After rising more than 40 points in the morning, the index eventually lost 8.02 to 2,313.87. The S&P 500 index gained 11.74 to 1,241.87.
Marshall Acuff, equity strategist at Salomon Smith Barney, said he expects the stock market to continue its gyrations within a limited trading range for the rest of the year, as investors gradually pull out of overvalued big name stocks and start seeking value and growth prospects in other corners of the market, especially among mid-cap issues. (263K WAV) or (263K AIFF)
The bond market ended mostly higher, with long-term bonds keeping their strong gains but the short end of the yield curve losing ground. The benchmark 30-year Treasury bond finished the day 1-3/32 points higher in price, for a yield of 5.34 percent.
The dollar continued to test new two-month highs against the yen after Japanese officials said overnight that Tokyo would be willing to accept a weaker yen as a result of last week's short-term interest-rate cut there. The dollar eased slightly from its morning highs against the euro.
Starting Tuesday, electronic trading collars on the New York Stock Exchange will activate to restrict program trading whenever the Dow industrials move more than 180 points from their previous close, a margin that will change once every quarter, depending on the Dow's level. Trading curbs will be activated only if the Dow moves 2 percent or more from its previous close. The collars previously had been triggered by moves of 50 points.
The afternoon's comparative lack of volatility on the first day of widened trading collars seemed to support Wall Street arguments that the old trading curbs were outdated.
Tech rebound falters
Technology stocks once again took center stage. The sector rallied in the morning and slumped in the afternoon as investors first picked bargains, then once again showed signs of concern over valuations among high-tech blue-chips.
Market players also braced to learn the latest earnings of two technology leaders -- Dell and Hewlett Packard -- after the closing bell.
Shares of Dell Computer (DELL) fell 1-1/8 to 88-3/4. This was on top of the nearly 12 percent the stock lost Friday when it weighed down on the high-tech sector as a whole after several analysts expressed doubts the company could sustain its stellar revenue growth.
Minutes after the closing bell, Dell said it earned 31 cents a share in the fourth-quarter, exactly in line with Wall Street expectations. Revenues in the quarter grew 38 percent to $5.2 billion, a figure well below the $5.5 billion analysts had bet on and a growth rate well below the 52 percent revenue increase Dell saw over the nine months that ended in October.
Dell also announced a 2-for-1 stock split.
Disappointed investors took the stock down to 75-1/2 in after-hours trading.
Dow component Hewlett Packard (HWP) fell 3-3/16 to 73-1/4 in regular trading.
Hewlett Packard also reported its latest earnings after the closing bell. The company earned 92 cents a share in the fourth quarter, sharply above the 83 cents Wall Street had expected. Its revenues grew 1 percent to $11.9 billion. The stock was halted for after-hours trading.
Also in the hot tech sector, and also reporting results after the close, shares of computer-chip equipment maker Applied Materials (AMAT) gained 1 to 67-7/8. The company reported operating profit of 11 cents a share in the fourth quarter, down from 52 cents a year earlier, but beating forecasts for 6 cents a share. The stock slipped to 67-1/2 in after-hours trading.
Other technology blue chips ended mostly lower after an early rally lost steam. Dow member IBM (IBM) eased 1/4 to 172-1/2, Microsoft (MSFT) fell 1-1/2 to 156-1/4, Intel (INTC) slipped 1/8 to 126-3/8, and Cisco Systems (CSCO) closed unchanged at 99-1/16. Dell competitor Gateway (GTW) fell 2-1/4 to 68 and rival Compaq (CPQ) was down 2-1/2 to 40-1/2.
In the day's other newsmakers, shares of retailer Wal-Mart (WMT) jumped 3-3/16 to 87-9/16 after the company reported better-than-expected fourth-quarter results.
Interest-rate-sensitive financial stocks gained ground, helped by the bond and dollar rallies. Among the Dow members, American Express (AXP) rose 2-1/4 to 102-3/16, Citigroup (C) gained 1-9/16 to 53-7/16 and J.P. Morgan (JPM) finished up 1-7/8 to 110-1/4. BankAmerica (BAC) climbed 1-3/4 to 64-5/8 and Chase Manhattan (CMB) gained 3-5/8 to 77-11/16.
Transports hesitate
Transportation, and especially airline stocks, also attempted a recovery after a turbulent week, pushing the Dow transports index up 23.87 points to 3,120.76.
However, the morning bounce proved short-lived for shares of AMR (AMR), the parent of American Airlines, which slid 1/8 to 55 as most of the company's pilots returned to work and flights resumed after a long sick-out last week.
Although the disruption cost American an estimated $90 million, airline analyst Ray Neidl of Baring Furman Selz doubted it will make much difference to the company's long-term outlook.
Shares of Delta Air Lines (DAL) eased 1/16 to 52-1/2. Delta announced plans to buy the remainder of the parent of Atlantic Southeast Airlines (ASAI) for about $700 million. UAL (UAL), the parent of United Airlines, slipped 5/8 to 59-3/8.
(Click here for a look at today's CNNfn market movers.)
(Click here for a look at today's CNNfn technology stocks report.)
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