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Techs up sharply
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December 21, 1999: 6:24 p.m. ET
Observers grow increasingly cautious as sector soars ahead
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NEW YORK (CNNfn) - Technology stocks continued to outpace the broader market Tuesday, leading the Nasdaq to its 56th record close for the year.
After trading at a level just above its open for most of the day, the Nasdaq spiked sharply after news that the Federal Reserve’s policy-making committee chose not to raise rates at its meeting Tuesday. The Nasdaq ended the session 127.27 higher at 3,911.15, a 3.36 percent rise on the day and its largest-ever one-day point gain.
While the blue chips also rose on the Fed news, the gains there were overshadowed by advancers in the tech sector, a scenario that has played itself out repeatedly on Wall Street in recent months.
The Dow Jones industrial average edged up a fraction of a percent, adding 56.27 to 11,200.54, while the S&P 500 gained a little more than 1 percent, ending the session 15.34 higher at 1,433.43.
But some marker watchers are growing increasingly dubious of the sustainability of the tech sector’s valuations.
Although most economists did not expect the Fed to raise rates at its meeting on Tuesday, many are predicting a rate hike in early 2000. While investors seem to have taken the potential for a rate hike into account in valuing some of the blue chips, technology issues have been relatively unaffected by the outlook, a condition that some observers say could cause some backlash early next year.
Characterizing the run-up in the technology sector as a "mania,” Bill Meehan, senior market analyst at Cantor Fitzgerald, told CNNfn that he expects the shift to come toward the end of February, ahead of the Fed’s March meeting. [297K WAV or 297K AIFF].
Greg Kuhn, stock market analyst at Kuhn Asset Management, said that he expects growth stocks to continue to lead the market higher, but cautioned individual investors interested in tech stocks to stick to the sidelines until the valuations come down a bit. [373K WAV or 373K AIFF].
Dot-coms on the ups
In Tuesday’s market action, all eyes were on the Internet segment.
Juno Online Services (JWEB) soared more than 130 percent, ending the session 37-3/4 higher at 66-3/4. The company on Monday announced that it would begin offering free, advertising-subsidized Internet access, and on Tuesday, PaineWebber reiterated its "buy” rating on the stock and raised its price target to $120 from $60.
"We believe that this is a significant positive for the company and the stock, as the evolution of its cost-effective free e-mail model” PaineWebber analyst James Preissler said in a research note. "This now positions Juno as the leading dial-up provider behind only AOL, and we believe that the current market cap of approximately $1.1 billion, substantially undervalues the company on a relative and fundamental basis.”
CMGI (CMGI) was among the day’s big winners, ending the session more than 21 percent higher, adding 48-1/16 to 270-1/4.. Shares of CMGI, an Internet "incubator” with 58 companies in its fold, got a boost after Merrill Lynch analyst Henry Blodget initiated coverage of the company with a short-term "accumulate" and long-term "buy" rating and a price target of $300 within 12 to 18 months.
"The stock is a core holding in our Internet portfolio,” Blodget told Reuters news service. "CMGI’s stock tends to trade as a proxy for the health of the Internet sector and Internet IPO market.”
An analyst’s upgrade also helped lift shares of Walt Disney Co.’s GO.com (GO) Internet portal, which added 6-1/8 to 28, a 28 percent rise on the day. Schroeder & Co. raised its rating on the company to "buy” from "neutral,” and raised its 12-month price target to $33 per share.
Shares of Web portal Yahoo! (YHOO) surged to a new high, adding 36-1/16 to 405-9/16 on news that it has extended its lead over the competition in recent months.
America Online (AOL) finished the session up 1/2 at 86-3/4. Internet retailing giant Amazon.com (AMZN) added 2-7/8 to 99-7/8.
On the downside among dot-coms Tuesday: eBay (EBAY) lost 4-11/16 to 144-3/8, a 3.14 percent decline on the day; Internet toy seller eToys (ETYS) ended the session more than 5 percent lower, losing 1-7/8 to finish at 32-15/16; and Internet consultant USWeb (USWB) slid 7/8 to 49-3/4, a 1.73 percent slide.
The Dow Jones composite Internet index ended Tuesday’s session 7.84 percent higher, picking up 30 to finish at 412.78.
Analogs lead semi segment
Semiconductor companies also posted strong gains Tuesday. The Philadelphia Semiconductor index, a key chip-industry barometer, ticked up 31.58 on the day, ending the session 4.73 percent higher at 698.88.
Manufacturers of analog semiconductors - which are used to convert real-world signals such as video and sound into a digital format usable by computers and other electronic devices - posted some of the sharpest gains.
Micrel (MCRL) surged 17 percent higher, adding 7-3/4 to finish at 53-1/4. Shares of Maxim (MXIM) gained 7.5 percent, picking up 6-5/8 to end at 94-7/16. Linear Technology (LLTC) added 5-1/8 to 73-13/16, a 7.46 percent gain on the day. And Analog Devices (ADI) finished the session 5.36 percent higher, adding 4-1/8 to 81-1/8.
Intel (INTC) also advanced, ending the session 2.24 percent higher, picking up 1-13/16 to 82-7/8. Intel rival Advanced Micro Devices (AMD), added nearly 3 percent, finishing 13/16 higher at 30-1/16.
Novellus Systems (NVLS), which makes equipment used in semiconductor manufacturing, continued to advance in the wake of an upbeat fourth-quarter earnings forecast. Shares of Novellus added 4-3/16 to 117-3/4, a 3.69 percent rise on the day.
Equipment makers mixed
Shares of Lucent Technologies bucked Tuesday’s upward trend, sliding nearly 3 percent, finishing 2-11/32 lower at 79-15/16, due to concerns its first quarter core revenue growth may be lower than in other quarters.
Other communications equipment manufacturers advanced on Tuesday. Cisco Systems (CSCO) edged up ¾ to 104, while Sun Microsystems (SUNW) ticked up 7/16 to 74-7/8.
Computer makers posted sharper gains.
Compaq Computer (CPQ) advanced nearly 10 percent, ending the session 2-1/2 higher at 27-5/8. Shares of Apple Computer (APPL) closed 4.59 percent higher ticking up 4-1/2 to 102-1/2. Dell (DELL) was up more than 4 percent, adding 2-1/6 to 49-3/4. Hewlett-Packard (HWP) added 2-23/32 to 108-3/4. And IBM (IBM) inched up 15/16 to 110-1/8.
Shares of Gateway (GTW) slipped 1, ending the session at 72.
Microsoft, Broadvision, i2 lead in software
In software, Microsoft (MSFT) continued its strong charge, ending Tuesday’s session 3-1/8 higher at 115-7/8. Shares of i2 Technologies (ITWO), which makes manufacturing supply-chain software, finished more than 18 percent higher, ending the session 27-5/8 higher at 180-5/8. Broadvision (BVSN) ended the session more than 8 percent higher, closing up 10-1/8 at 136-1/8.
Adobe (ADBE]) slipped 1-7/8 to 63-3/8. Shares of Veritas (VRTS) lost 1-7/16, ending at 123-15/16. And Electronic Data Systems slid 1-13/16 to 63-5/8.
The bulls are still there
While some market observers are looking at the tech sector as a bubble that is bound to burst, not everyone is backing off.
Ralph Acampora, chief technical analyst at Prudential Securities, said that the big names in the tech sector will continue to shine in 2000, with the rally extending out to those tech stocks that have not advanced as sharply as well as the broader stock market in general. [259K WAV or 259K AIFF]
Acampora said he expects the Nasdaq to end 2000 in the range of 4,800 to 5,000 and the Dow Jones industrial average to move up to a range 13,500 to 14,000. 
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