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Dow rises, Nasdaq plunges
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April 14, 1999: 5:19 p.m. ET
Blue chips set another record profit worries hurt technology stocks badly
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NEW YORK (CNNfn) - Blue-chip stocks climbed to their third straight record close Wednesday, powered by strong earnings among financial companies and a shift of focus among investors toward cyclical stocks and away from technology issues.
Profit growth concerns in the technology sector, however, sent the Nasdaq plummeting as volume on the electronic exchange soared to its highest level in history.
The Dow Jones industrial average rose 16.65 points to an all-time high of 10,411.66. Advances beat declines by a sizable margin of 1,732 to 1,289 as 958 million shares traded on the New York Stock Exchange.
Despite the Dow's recent powerful climb, Courtney Smith, chief investment officer at Orbitex Management, said valuation concerns, market breadth problems and a possible increase in inflation fears on Wall Street could lead to a short-term market correction before the Dow heads up toward 11,000. (165K WAV) or (165K AIFF)
The Nasdaq Composite sank 76.04 points, or 2.9 percent, to 2,507.46, on volume of 1.4 billion shares. The S&P 500 index lost 21.32, or 1.6 percent, to 1,328.50.
Bonds fell as most investors shifted their attention to the stock market. The benchmark 30-year Treasury bond lost 7/32 of a point in price to yield 5.50 percent.
The dollar traded modestly lower against the euro and sank to near two-week lows against the yen.
Intel gets mixed reviews
In the stock market, technology issues once again put in a mixed performance, following Tuesday night's earnings report by Intel (INTC), which managed to feed both the bulls and the bears.
Although the world's largest PC chip maker reported a 57 percent jump in quarterly profit and beat consensus estimates with per share earnings of 57 cents, the company also said revenue in the second quarter will be flat to lower, dampening an otherwise positive earnings report. Shares of the company closed 3-3/8 lower at 57-1/8.
Intel's revenue forecast reverberated strongly among investors fearing a slowdown in the computer industry, especially in the wake of a dramatic profit warning by leading PC maker Compaq (CPQ).
Investors seized on the negative implications, lightening their holdings of other technology bellwethers. Dell (DELL) fell 2-5/16 to 38-1/8 and Microsoft (MSFT) shed 4-1/4 to 85-7/8, but on the Dow, Hewlett Packard (HWP) inched up 3/16 to 71.
Fellow Dow computer-maker IBM (IBM) eased 5/8 to 179-3/8, and Compaq (CPQ) edged up 1/8 to 24.
Apple Computer (AAPL), which shortly after the closing bell reported earnings sharply above expectations, climbed 1-1/8 to 35-3/4 in regular trading. It eased to 35 in after-hours trading.
Intel competitor Advanced Micro Devices (AMD), which was expected to report an operating loss Wednesday night, slipped 1/4 to 14-3/4.
Despite all the red ink, Michael Farr, president of money-management firm Farr, Miller & Washington, called Intel "one of the great companies of our day" and said the market's reaction to the earnings release "scared" him.
"We do like Intel very much," he said. "We think the price today -- if you're going to hold Intel for the next five years -- is a great way to go."
Financials save the day
For the third day in a row, the stock market's best support came from financial shares, as earnings in the sector continued to show solid growth and consistently beat expectations.
Finance and other sectors are now sharing market leadership with the formerly unquenchable technology stocks, said Arthur Hogan, chief market analyst at Jefferies & Co. While he noted that technology would be unlikely to ever give up its leading role entirely, he said funds are now flowing out of the tech sector and into finance, retail, oil and paper.
Bearing the bull's flag Wednesday, shares of Dow component J.P. Morgan (JPM) rallied 3-9/16 to 132-7/8 after the venerable Wall Street institution left earnings projections in the dust, reporting per share profit of $3.01, some $1.28 above estimates. Merrill Lynch upgraded its recommendation on the stock to "long-term buy" from "long-term accumulate."
J.P. Morgan's strong results were just the latest in a string of solid quarterly reports from fellow investment bankers Merrill Lynch (MER), PaineWebber (PWJ), Bear Stearns (BSC) and Morgan Stanley Dean Witter (MWD).
Shares of several brokers and financial-services companies fell under a profit-taking barrage after days of strong gains. Online brokerage house E*Trade (EGRP) shed 12-5/8 to 112-7/8.
Leading rivals Ameritrade (AMTD) and Charles Schwab (SCH) also retreated. Ameritrade, which after the bell reported earnings of 14 cents a share for its fiscal second quarter, twice the market estimate, sank 25-1/4, or more than 14 percent, to 148 in regular trading. The stock surged 10 to 158 shortly after the earnings report became public. Schwab, also expected to release its earnings after the bell, lost 12-1/4 to 138-3/16.
Earnings in the spotlight
Earnings news dominated the rest of the market as well, after Motorola (MOT) beat expectations and Lucent Technologies (LU) predicted its second-quarter results would meet or exceed projections.
Shares of Lucent rallied 2-7/16 to 59-3/8, while Motorola rose 3/16 to 83-1/8. Motorola also was upgraded to "buy" from "outperform" by Salomon Smith Barney.
Seagate Technology (SEG) climbed 1-9/16 to 28-3/16 after the maker of computer storage drives reported better-than-expected fiscal third-quarter earnings.
Cable Internet-access provider @Home (ATHM) found a chilly response to its own operating loss, which exactly met expectations. Investors, however, proved unforgiving, sending shares down 22-15/16 to 159-1/16.
Outside the technology sector, paper stocks continued to do well, with International Paper (IP) in particular, underpinning the Dow a day after its own strong earnings report. Shares of International Paper climbed 3-5/8 to 52-1/4.
Joining IP on the way up, and showing a newfound taste for cyclical stocks among investors, fellow Dow component Caterpillar (CAT) rallied 5-15/16 to 60-11/16.
Airlines on the climb
Airline stocks soared, rallying to catch up with the rest of the market as the sector's growth outlook seemed to improve. Unlike other sectors, the airlines still have not completely recovered from their October lows, noted Steve Lewins, Gruntal & Co. analyst.
However, the recent torrent of indications that the U.S. economy continues to expand has given the economy-sensitive sector a boost.
The Dow transportation index rocketed 146.88 points, or a whopping 4.5 percent, to 3,443.32, the index's second-largest one-day point gain. Shares of AMR (AMR), holding company of American Airlines, rose 3-11/16 to 69, while United holding company UAL (UAL) climbed 3-7/16 to 82-1/16. Delta Airlines (DAL), which reports its latest earnings Thursday, saw its shares firm 2-11/16 to 71-3/16.
(Click here for a look at today's CNNfn's market movers.)
(Click here for a look at today's CNNfn technology stocks report) 
-- by staff writer Malina Poshtova Zang with Robert Scott Martin
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