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Nasdaq party continues
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February 8, 2000: 6:08 p.m. ET
Techs power third consecutive record; Dow, S&P 500 also gain
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - The Nasdaq composite index soared to its third consecutive record close Tuesday, closing above the 4,400 level for the first time, powered by gains among Internet and high-tech stocks.
In addition, the Dow Jones industrial average and broad-based S&P 500 posted robust gains after a report on worker productivity suggested inflation remains in check, calming investors' fears of aggressive interest rate hikes by the Federal Reserve.
"Clearly today the catalyst was the better-than-expected productivity report. All that feeds into the techs," said Marshall Acuff, equity strategist at Salomon Smith Barney.
The Nasdaq composite index rallied 105.73 points, or 2.5 percent, to 4,427.50, its seventh largest daily point gain. Trading volume was the second heaviest day on record at 1.97 billion shares, nearing the record of 1.98 billion on Jan. 24.
The Dow Jones industrial average rose 51.81 to 10,957.60, and the S&P 500 index advanced 18.75, or 1.3 percent, to 1,441.75.
On the New York Stock Exchange, advances outnumbered declines 1,588 to 1,438, on trading volume of 1 billion shares. On the Nasdaq, advances led declines 2,385 to 1,842.
Treasury prices rose sharply. The benchmark 30-year bond gained more than a full point, lowering its yield to 6.23 percent from 6.34 percent late Monday.
The dollar rose against the yen and fell against the euro.
U.S. productivity jumps
In economic news, U.S. worker productivity jumped 5 percent in the fourth quarter, the fastest pace in seven years, according to the Labor Department report. Meanwhile, unit labor costs fell 1 percent, below expectations of a 0.5 percent rise, suggesting that inflation remains in check.
Analysts said the data alleviates some concerns of aggressive interest rate hikes from the Federal Reserve. "(These numbers) confirm that the labor market is not at the moment the source of anything that could be plausibly described as inflationary pressure," said Ian Shepherdson, chief U.S. economist at market analysis firm High Frequency Economics.
As the U.S. economy continues to boom within the longest economic expansion in its history at 107 months, investors' fears of surging interest rates have plagued the market -- particularly the blue chip issues that are more inflation-sensitive. The Fed increased rates three times last year in an effort to slow the economy and preempt inflation. Last week, it hiked rates again by a quarter point.
As a result of the economic news, both the blue-chip index and S&P 500 regained footing. "Today's productivity report neutralizes some of the interest rate fears and negative impact they've had on the broader equity market," said Tony Dwyer, chief market strategist at brokerage firm Kirlin Holdings.
Analysts were bullish about the overall market. "(The report) combined with strong earnings growth and merger activity should lead to the upside for the general market," Kirlin Holding's Dwyer added.
Peter Green, technical strategist at Gruntal & Co., told CNNfn's Talking Stocks program that the productivity number offers encouragement to investors for the short term. (307K WAV) (307K AIFF)
Technology strength continues
The Nasdaq composite index continued its winning streak Tuesday, posting gains for seven consecutive sessions. The index has risen more than 8 percent this year. Analysts said that within an environment of tame inflation, the best growth will come from the technology and communications sectors.
Strength among many bellwether high-tech stocks boosted the index. Microsoft (MSFT: Research, Estimates) rose 3-5/16 to 109-15/16, and Intel (INTC: Research, Estimates) added 7/8 to 108-13/16.
Also lifting the Nasdaq was MCI WorldCom (WCOM: Research, Estimates). Shares of the telecommunications company rose 2-15/16 to 50-15/16, extending Monday's sharp gains. It is scheduled to report fourth-quarter results Thursday.
After the market close, Cisco Systems (CSCO: Research, Estimates) reported better-than-expected fiscal second-quarter earnings of 25 cents a share against forecasts of 24 cents.
Shares of the leading maker of equipment that powers the Internet edged up 5/8 to 125-13/16 during regular trading hours. The stock advanced to 130-9/16 in after-hours trade, according to Instinet.
Internet stocks performed well. America Online (AOL: Research, Estimates) rose 1-3/4 to 58-3/4, and Amazon.com (AMZN: Research, Estimates) jumped 8-1/8, or nearly 11 percent, to 83-1/8. Yahoo! (YHOO: Research, Estimates) added 19-1/8 to 373-1/8 despite suffering an outage Monday due to an attack by computer hackers.
But pressuring the Nasdaq was Dell Computer (DELL: Research, Estimates). The world's No. 1 direct seller of personal computers slumped 9/16 to 37-1/16 after Warburg Dillon Read downgraded its stock to "hold" from "buy."
HotJobs.com (HOTJ: Research, Estimates) also suffered, tumbling 2-7/16 to 28-1/2. The online recruiter late Monday reported a net loss three times wider than the year-earlier period, citing increased advertising and marketing spending.
Lucent Technologies (LU: Research, Estimates) was the most actively traded stock on the New York Stock Exchange. Shares of the nation's leading maker of telecom equipment fell 3-1/8 to 53-1/2 after Schroder & Co. downgraded the stock to "underperform" from "outperform."
Al Goldman, chief market strategist for A.G. Edwards & Sons, told CNNfn's market coverage that a bull market sparked by technology and telecom issues is about to broaden. (283K WAV) (283K AIFF)
Wal-Mart lifts the Dow
Aside from technology, gains to Dow component Wal-Mart Stores (WMT: Research, Estimates) boosted the blue chip index. Shares of the world's No. 1 retailer advanced 3-1/2 to 59-1/4 after Lehman Brothers Tuesday raised its 12-to-18 month price target on the stock to $100 from $80.
Larry Wachtel, Prudential Securities market analyst, told CNNfn's market coverage that he sees some fits and starts for equities in the coming weeks. (249K WAV) (249K AIFF)
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