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Bulls return to Wall Street
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April 12, 1999: 2:01 p.m. ET
Led by blue chips, stocks head into rally after early Compaq-related selling
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NEW YORK (CNNfn) - A strong rally was under way on Wall Street Monday afternoon as investors shrugged off an early sell-off and focused on strength in the broader market, despite a profit warning from Compaq that rattled technology stocks.
Shortly after 1:30 p.m. ET, the Dow Jones industrial average roared 125.98 points, or 1.2 percent, higher to 10,299.82, well into record territory The broader S&P 500 index advanced 7.34 to 1,355.69, also reaching for new highs.
On the New York Stock Exchange, advances took the lead over declines, by a margin of 1,598 to 1,298 as trading volume climbed to 524 million shares.
Even the Nasdaq, heavily weighted with technology issues, recovered from a 2.5-percent sell-off at the start of the session, to move 12.45 points higher to 2,605.50.
The bond market remained higher, even as investors returned to stocks. The benchmark 30-year Treasury bond traded 14/32 of a point higher in price for a yield of 5.43 percent.
The dollar also recovered from its early weakness against the yen and moved off its lows against the euro.
Financials trigger the rally
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 1-1/16 to 50-11/16.
Elsewhere among the brokers, Merrill Lynch (MER) gained 2-1/2 to 100-5/8, and Donaldson, Lufkin & Jenrette (DLJ) rallied 5-13/16 to 91-13/16.
Other financials traded mixed. Chase Manhattan (CMB) advanced 1-9/16 to 87-1/8 and BankAmerica (BAC) eased 1/8 to 74-1/4.
Among the Dow components, American Express (AXP) rose 6 to 134-3/8, Citigroup (C) edged up 5/16 to 73-15/16 and J.P. Morgan (JPM) was 1/2 higher at 129-1/4.
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 22.6 percent, or 7, to 23-15/16, the stocks of its competitors were quick to follow suit. Dell Computer (DELL), the leading made-to-order computer manufacturer, fell 2-1/16 to 41-1/2 and rival Gateway (GTW) dropped 2-7/8 to 69-7/8, 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 1-1/8 to 93-1/8 and chip maker Intel (INTC) shed 4 to 61-7/16. But Cisco Systems (CSCO), the top maker of networking equipment, recovered from an early slump to see its shares rise 5/8 to 118-3/4.
Among the Dow 30, shares of Hewlett Packard (HWP) fell 1-13/16 to 67-13/16 after two downgrades of its stock, and IBM (IBM) shed 3-5/8 to 182-11/16. 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 27-3/16, or more than 13 percent, to 234-11/16. 
-- by staff writer Malina Poshtova Zang
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