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Stocks dance around Fed
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June 29, 1999: 5:08 p.m. ET
First day of FOMC meeting ends with Wall Street triumphantly in the black
By Staff Writer Robert Scott Martin
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NEW YORK (CNNfn) - The first day of a long-awaited Federal Reserve meeting Tuesday did little to discourage Wall Street's high spirits, allowing both technology shares and blue chips to soar in defiance of lingering interest-rate fears.
The Dow Jones industrial average closed up 160.20 points, or 1.5 percent, at 10,815.35. Trading volume on the New York Stock Exchange remained lackluster at only 769 million shares, while advances outpaced declines 1,822 to 1,127.
The Nasdaq composite gained 39.67 points, or more than 1.5 percent, to end the day at 2,642.11 and the S&P 500 index rose 20.10, or 1.5 percent, to 1,351.45.
Traders attributed most of the market's rallying spirits to technical factors, particularly investors adjusting their portfolios ahead of the end of the second quarter. However, Wall Street also got a boost from the morning's simultaneous 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. As such, the news soothed investor fears that the Fed's Open Market Committee (FOMC) will not only raise rates Wednesday but continue to ratchet U.S. interest rates upward over the rest of the year as well.
"I think if (FOMC members) maintain the bias (toward higher interest rates), the market will continue to be jittery, expecting further tightening," said Joseph Lavorgna, senior economist at Deutsche Bank Securities. "Of course, the wording of the announcement will also be important."
Bonds, a key reflection of long-term rate trends, got their own quiet lift from the data, leaving the benchmark 30-year Treasury bond up 13/32 of a point in price to yield 6.06 percent, but many investors remained on the sidelines during the FOMC meeting.
The dollar edged up against the euro, but retreated from the yen as speculators continued to buy into Japan's apparent economic recovery.
Finance and oil rejoice
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.
Shares of financial-services companies like banks and brokerages, the most vulnerable segment of the economy to rising interest rates, were among the winners. Higher rates would making borrowing more difficult, curtailing these companies' lending revenues and hurting the bottom line.
American Express (AXP) gained 2-3/16 to 127-7/16, while fellow Dow financial component J.P. Morgan (JPM) added 1-11/16 to 135-3/4.
In the oil sector, Dow driller Chevron (CHV) climbed 4-3/16 to 93-11/16 after Donaldson, Lufkin & Jenrette analyst John Hervey, upgraded the stock to "buy" from "market perform." In particular, Hervey expected Chevron to "deliver one of the best growth records in the sector," and said that the stock's recent decline had erased any valuation concerns.
Tech shares mixed
In the likewise rate-sensitive technology sector, which would suffer reduced growth prospects from higher rates, shares of industry bellwethers ended the day mixed as investors wavered between long-standing rate fears and encouraging corporate news.
Shares of beleaguered computer maker Compaq (CPQ) climbed 1-1/8 to 23-7/16 after it agreed to sell its Internet assets to Web venture capital firm CMGI (CMGI) for $2.3 billion. CMGI shares surged 12-5/8, or nearly 13 percent, to 110-5/16, leading a general rally in the Internet sector.
However, among the other computer makers, Dell (DELL) eased 3/8 to 36-11/16 and Gateway (GTW) slipped 15/16 to 59-13/16.
IBM (IBM) shares climbed 2-1/16 to 124-5/8 after company officials refused to comment on speculation that the Dow computer heavyweight is negotiating to buy computer systems maker Sequent (SQNT). Still, the merger buzz was enough to push Sequent shares up 3-9/16, or more than 25 percent, to 17-9/16.
Elsewhere in the technology sector, Intel (INTC) climbed 2-1/4 to 59-1/4 and Microsoft (MSFT) edged up 1-1/4 to 88. Cisco Systems (CSCO), which early Tuesday said it will pay $435 million for privately-held chip-equipment maker StratumOne, gained 9/16 to 62-1/2.
Warnings add bitter note
Despite the market's sudden burst of rate optimism, several companies still disappointed investors by warning of profit shortfalls ahead.
Shares of Frontier (FRO) lost 3/16 to 58-1/8 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 2-1/4 to 27-3/8 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 7/8 to 40-1/8
On the bright side, Newport News (NNS) shares climbed 5/16 to 30-9/16 after the ship-building firm said its second quarter will come in a few cents per share better than expected.
(Click here for a look at today's list of CNNfn's market movers.)
(Click here for today's CNNfn technology stocks report.) 
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