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Dow rises with rate hopes
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June 29, 1999: 11:49 a.m. ET
Stocks climb with bonds as Fed starts pondering decision on interest rates
By Staff Writer Robert Scott Martin
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NEW YORK (CNNfn) - Economic data came to Wall Street's rescue Tuesday morning, giving interest-rate wary investors hope that the Federal Reserve will raise rates by only a small amount when its two-day meeting concludes Wednesday.
Traders said the stock market got a boost from the simultaneous mid-morning releases of new home sales, which came in weaker than expected, and consumer confidence figures, which remained at a 31-year high. Together, the data indicated that the U.S. economy's expansion remains under control, while an optimistic outlook should keep buying demand -- and hence, corporate profits -- on an upward course.
Shortly before 11:30 a.m. ET, the Dow Jones industrial average reversed early losses to climb 32.92 points to 10,688.07. Volume remained light on the New York Stock Exchange at only 248 million shares traded, while advances outpaced declines 1,390 to 1,158.
The Nasdaq composite gained 16.47 points to 2,618.91 and the S&P 500 index rose 3.76 to 1,335.11. (Click here for a look at today's list of CNNfn's market movers.)
Bonds drifted quietly higher on the data, but many investors were still on the sidelines ahead of Wednesday's interest-rate announcement from the Federal Reserve. The Fed's Open Market Committee (FOMC) is meeting Tuesday and Wednesday to determine U.S. interest rate policy. While the market now believes the FOMC will raise the funds rate slightly, few participants dared deepen their positions for fear of a Fed surprise, leaving the benchmark 30-year Treasury bond up a narrow 5/32 of a point in price to yield 6.08 percent.
The dollar regained its footing against the euro but retreated from the yen as speculators continued to buy into Japan's apparent economic recovery.
Tech shares mixed
On Wall Street, rate-wary stocks once again followed the bond market upward, although some investors remained ready to lock in profits from Monday's rally.
In the interest rate-sensitive technology sector, which would suffer reduced growth prospects from higher rates, shares of industry bellwethers were mixed as investors wavered between lingering rate fears and encouraging corporate news.
Shares of beleaguered computer maker Compaq (CPQ) climbed 5/8 to 22-7/8 after it agreed to sell its Internet assets to Web venture capital firm CMGI (CMGI) for $2.3 billion. CMGI shares climbed 8-15/16 to 106-5/8, leading a general rally in the Internet sector.
Dell (DELL) edged up 1/16 to 37-1/8, but Gateway (GTW) slipped 5/8 to 60-1/8 and, on the Dow, Hewlett Packard (HWP) eased 1-1/16 to 96-5/16.
IBM (IBM) shares climbed 1-3/4 to 124-5/16 after company officials refused to comment on speculation that the Dow computer heavyweight is negotiating to buy computer systems maker Sequent (SQNT). Sequent shares surged 3-3/4, or more than 26 percent, to 17-3/4.
Elsewhere in the technology sector, Intel (INTC) nosed up 1-7/16 to 58-7/16 and Microsoft (MSFT) gained 3/4 to 87-1/2. Cisco Systems (CSCO) added 1/8 to 62-1/16.
Warnings, warnings
Despite the market's newfound optimism over rates, several companies heaped downward pressure on stocks by warning after the closing bell Monday that investors should expect profit shortfalls ahead.
Shares of Frontier (FRO) lost 13/16 to 57-1/2 after the telecommunications provider said upcoming profits will miss the mark. The company blamed long-distance pricing pressures for its forecast of second-quarter earnings of 20-22 cents per share, while analysts had been looking forward to 28 cents.
Disk drive maker Seagate (SEG) also warned that pricing pressures and disappointing sales had caused it to revise its earnings forecast for the fiscal fourth quarter down to 32-37 cents per share. Wall Street had expected a figure of 49 cents, pushing Seagate shares down 2-1/2 to 27-1/8 in frustration.
Not even the Dow blue chips were spared the urge to confess shortfalls ahead, as Philip Morris (MO) demonstrated by admitting 1999 profits will miss the mark by 2 cents per share. Shares of the tobacco and grocery-products conglomerate fell 15/16 to 40-1/16.
On the bright side, Newport News (NNS) shares climbed 1/4 to 30-1/2 after the shipwright firm said its second quarter will come in a few cents per share better than expected.
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