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Carbide charges blue chips
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August 4, 1999: 1:48 p.m. ET
Chemical merger lifts Dow, but techs, other stocks lack momentum
By Staff Writers Malina Poshtova Zang and Robert Scott Martin
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NEW YORK (CNNfn) - A massive merger in the chemical industry gave the blue-chip Dow Jones industrials a firm boost Wednesday, but the broader market found it difficult to benefit either from the deal buzz or a far more subdued rally in the financial sector.
Shortly before 1:30 p.m. ET, the Dow Jones industrial average climbed 112.39 points, or 1.1 percent, to 10,789.70. About half of the gains were from shares of Union Carbide surging on the strength of the company's announced merger with Dow Chemical, a combination that could create an industrial powerhouse with annual revenue of more than $24 billion.
Despite the Dow's rally, gains in the rest of the market were relatively narrow, with declines outnumbering advances 1,624 to 1,170. Trading volume on the New York Stock Exchange reached 457 million shares.
Broader indexes stepped away from the blue-chip rally, with the Nasdaq composite index losing 15.38 points to 2,572.61 and the S&P 500 index easing 0.05 to 1,322.13. (Click here for a look at today's list of CNNfn market movers.)
Bonds surged after the Treasury Department confirmed investors' hopes by proposing to buy back some existing government debt early next year. The Treasury also said it will scrap the November 30-year bond auction, effectively damming the pipeline of future supply. As a result, the benchmark 30-year Treasury bond soared 18/32 of a point in price, while the yield fell to 6.11 percent from Tuesday's closing level of 6.16 percent.
The dollar retreated against the yen as the threat of a round of buying from the Bank of Japan and the Federal Reserve failed to materialize, giving yen bulls new incentive to buy the Japanese currency. The euro also put the dollar on the defensive as global investors remained cautious about buying into U.S. stocks and bonds.
Merger spices up slow August
Stock market participants, weary after weeks of choppy trading on Wall Street and a second-quarter earnings season that produced few surprises, finally found excitement in the Dow Chemical (DOW)-Union Carbide (UK) announcement.
The $11.6 billion stock-and-debt deal, which gives Union Carbide shareholders a 37 percent premium over Tuesday's closing stock price of 48-13/16, also will result in job cuts of about 4 percent for the combined workforce of the two companies.
Shares of Union Carbide soared 10-3/4, or 22 percent, to 59-9/16. Dow Chemical tumbled 7-1/8 to 117-9/16.
DuPont (DD), the Dow industrials' other chemical component and currently the largest U.S. chemical conglomerate, edged up 9/16 to 72-1/4.
Rate euphoria wanes
Investors' sentiment toward the broader market remained diffident, however, although bonds' sudden upturn gave interest rate-sensitive investors new hope that higher rates could be postponed a while longer.
Bond yields reflect long-term interest rate trends, with declining yields indicating growing certainty that official rates -- set by the Federal Reserve -- will not climb in the near future.
In particular, shares of technology and financial-services companies, as the sectors most susceptible to changes in interest rate policy, enjoyed a brief rally. Rising rates hurt banks and other financial firms by drying up revenue from lending, while growth-oriented tech companies find themselves starved for the borrowing opportunities they need for expansion.
Although the bullish mood soon faded, two of the Dow's three financial components remained in positive territory. American Express (AXP) climbed 9/16 to 127-1/4 and Citigroup (C) gained 5/8 to 44-3/4, but J.P. Morgan (JPM) lost ¼ to 127-1/16.
After a similarly short-lived bounce, the mood in the technology sector was even more tentative, with many recently beaten-down high-tech leaders struggling to solidify their gains in the face of renewed selling in the Internet sector.
Shares of IBM (IBM) rose 1-7/16 to 120-13/16, while fellow Dow computer maker Hewlett Packard (HWP) gained 1-11/16 to 110-3/16.
On the Nasdaq, Microsoft (MSFT) was up 1-7/8 at 86-5/8, Intel (INTC) edged up 11/16 to 73-5/8 and Cisco Systems (CSCO) rose 7/16 to 61-9/16.
Web shares, meanwhile, continued their tumultuous slide from Tuesday. Among the sector's leaders, Amazon.com (AMZN) lost 3-7/8 to 91 and venture-capital fund CMGI (CMGI) fell 3-15/16 to 77-15/16. Leading portal Yahoo! (YHOO) retreated 3-1/8 to 122-1/4.
Elsewhere in the market, shares of paper manufacturer International Paper (IP), a Dow component, leapt 3-9/16 to 55-9/16 following industry-positive comments from Morgan Stanley Dean Witter analyst Matt Berler. In a statement, Berler said he believes demand for wood pulp products is growing, and the August market already looks stronger than expected. 
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