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Blue chips shake off the blues
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April 12, 1999: 11:35 a.m. ET
Strong financials help limit some of the losses from a technology sell-off
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NEW YORK (CNNfn) - Heavy selling abated on Wall Street at midday Monday as strength among financial shares weighed against severe weakness in the tech sector after Friday's surprise profit warning by computer maker Compaq.
Although Compaq's stock is traded on the New York Stock Exchange, losses were by far the greatest at the Nasdaq, the electronic market heavily weighted with technology issues. The Nasdaq Composite opened with a loss of almost 2.5 percent but recovered later, and shortly before 11:30 a.m. ET stood 21.97 points, or less than 1 percent, lower at 2,571.08.
The Dow Jones industrial average shook off its early losses to edge 0.83 point higher to 10,174.67. The broader S&P 500 index fell 6.75 to 1,341.60. On the New York Stock Exchange, declines outnumbered advances 1,537 to 1,150 as trading volume climbed to 277 million shares.
The bond market rose, attracting nervous stock investors. The benchmark 30-year Treasury bond traded 10/32 of a point higher in price for a yield of 5.43 percent.
The dollar, however fell, stung by the sudden exodus of investors from stock markets around the world.
Compaq's bombshell explodes
Late Friday, after the market closed , Compaq (CPQ), the world's leading PC maker, announced its first-quarter earnings will fall more than 50 percent below expectations. The company blamed slow demand for PCs and pricing pressures for its weak performance, prompting some market analysts to conclude that Compaq's problems could be indicative of the industry as a whole.
At least eight analysts downgraded Compaq's stock, largely to "neutral" from "buy."
As Compaq's shares plunged 21.6 percent, or 6-11/16, to 24-1/4, the stocks of its competitors were quick to follow suit. Dell Computer (DELL), the leading made-to-order computer manufacturer, fell 2-5/16 to 41-1/4 and rival Gateway (GTW) dropped 3-1/2 to 69-1/4, following a downgrade by Salomon Smith Barney to "neutral" from "buy."
The selling encompassed other areas of the high-tech sector as well. Software maker Microsoft (MSFT) lost 2-1/8 to 92-1/8 and chip maker Intel (INTC) shed 3-7/8 to 61-9/16. Cisco Systems (CSCO), the top maker of networking equipment, saw its shares decline 1-3/4 to 116-3/8.
Among the Dow 30, shares of Hewlett Packard (HWP) tumbled 4-1/4 to 65-3/8 after two downgrades of its stock, and IBM (IBM) shed 4-5/16 to 182. IBM announced a partnership with Web broadcaster RealNetworks (RNWK), a move aimed at ensuring IBM a large chunk of the growing market for video and audio broadcast over the Internet. Shares of RealNetworks soared 23-7/16, or more than 11 percent, to 230-15/16.
Financials soften the blow
News of strong earnings from the financial services sector helped limit the early losses on Wall Street and later supported the market recovery.
Following a surprisingly strong report by Morgan Stanley Dean Witter (MWD) a couple of weeks earlier, fellow Wall Street player Bear Stearns (BSC) also announced record fiscal third-quarter profit that came in sharply above expectations. Shares of Bear Stearns rose 1-3/16 to 50-13/16.
Elsewhere among the brokers, Merrill Lynch (MER) gained 1-3/8 to 99-1/2, and Donaldson, Lufkin & Jenrette (DLJ) rallied 2-7/8 to 88-7/8.
Other financials traded mixed. Chase Manhattan (CMB) advanced 1-5/16 to 86-7/8 and BankAmerica (BAC) eased 3/8 to 86-7/8.
Among the Dow components, American Express (AXP) rose 2-3/8 to 130-3/4, Citigroup (C) lost 3/8 to 73-1/4 and J.P. Morgan (JPM) was 9/16 higher at 129-5/16. 
-- by staff writer Malina Poshtova Zang
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