|
Deals drive stocks higher
|
 |
May 15, 2000: 5:52 p.m. ET
Int'l Paper, Philip Morris boost Dow; Lycos helps Nasdaq follow blue chips
By Staff Writer Catherine Tymkiw
|
NEW YORK (CNNfn) - Blue chip stocks gained nearly 200 points Monday, bolstered by two separate deals involving Dow components International Paper and Philip Morris. Technology stocks also rose, but Nasdaq trading was light ahead of Tuesday's key meeting of the Federal Reserve.
"You do have some impetus today but there's little conviction and little volume," said Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum. "I didn't see any specific reason behind the rally - people may be just trying to outguess the outcome (of the Fed meeting)."
Both the Nasdaq and the Dow suffered from a severe lack of participation, as investors mainly sat on the sidelines amid concern about how aggressive the Federal Reserve's Open Market Commitee will be on interest rates.
 The Nasdaq extended two sessions of advances to surge 78.62 points, or more than 2 percent, to 3,607.68. The index is still up 10 percent from its low of 3,227 on April 17. But the composite is 28 percent off its March 10 high.
The Dow also advanced two sessions of gains to rise nearly 2 percent, jumping 198.41 points to 10,807.78. The broader S&P 500 gained 31.40 to 1,452.36.
"I don't think we can read anything at all into it. It's a lack of conviction and a lot of fence-sitting," said Alan Skrainka, chief market strategist at Edward Jones.
While market breadth was mixed, volume displayed the lackluster interest. Advancing issues on the New York Stock Exchange outpaced declining ones 1,752 to 1,151 as more than 849 million shares changed hands. But losers still beat winners on the Nasdaq 1,926 to 1,854 on volume of more than 1.14 billion shares.
In currency markets, the dollar rose against the yen and the euro. Treasury securities edged higher.
Spotlight shines on Fed
The Federal Reserve's policy-making body meets Tuesday. Most experts predict the Fed will boost short term interest rates by a half-point, the largest increase by the Fed in five years. The Fed has tightened credit five times since last June, bringing its main lending rate -- the Fed funds rate -- up to 6 percent.
Click here for full coverage on the Fed meeting.
Some analysts expect a pop in the market after the expected rate hike is announced, but they also caution that it will be short-lived.
"Most of the growth stories are not performing today and that is how we'll go into the Fed meeting," said Hyman. "There's still very little conviction in the market."
But the long-term outlook for technology remains positive as Michael Moe, growth stock strategist for Merrill Lynch, told CNNfn he still sees a host of positives for the stock market ahead, including low inflation coupled with strong corporate earnings growth. (320K WAV) (320K AIFF)
In Monday's economic data, U.S. industrial production and factory capacity use posted their biggest monthly gains in more than a year and a half in April, the Federal Reserve reported, reflecting robust consumer spending and continued demand for American-made goods.
Production at U.S. mines, factories and utilities gained 0.9 percent in April, above March's revised 0.7 percent gain and also higher than the 0.8 percent increase expected by economists polled by Briefing.com. It was the largest gain since a 1.8 percent jump in August 1998, the Fed said.
Deals lift Dow; spillover boosts Nasdaq
Deals associated with International Paper and Philip Morris gave the two Dow components a boost, taking the rest of the Dow to higher ground.
International Paper (IP: Research, Estimates) soared 3-5/8 to 40-7/16 after it agreed to acquire rival Champion International (CHA: Research, Estimates) late Friday for $7.3 billion in cash and stock. The agreement came after Finland's UPM-Kymmene bowed out of the bidding war for the forestry and paper products company. Champion gained 2-3/4 to 73-1/4.
 A new bidding war appears to be under way for food producer Nabisco. The bidding was started by financier Carl Icahn, who outlined his $6.5 billion, or $22 a share, bid for Nabisco Group Holdings (NGH: Research, Estimates) Friday. Nabisco shares gained 3-5/16 to 23.
The company has signed 13 confidentiality agreements with interested bidders, according to one investment banker. Among the companies believed to be interested are Philip Morris (MO: Research, Estimates) and former Nabisco unit R.J. Reynolds Tobacco (RJR: Research, Estimates), neither of which would be as concerned about Nabisco's potential tobacco liability as some bidders. Philip Morris rose 2-7/8 to 27-3/16, and R.J. Reynolds jumped 13/16 to 24.
The Dow was further supported by financials. J.P. Morgan (JPM: Research, Estimates) surged 1-1/2 to 132, American Express (AXP: Research, Estimates) gained 1-15/16 to 52-3/16, and Citigroup (C: Research, Estimates) rose 2-11/16 to 62-7/8..
 The Nasdaq was shaky as the tech-heavy index struggled for support, partly boosted by Lycos. "Since the perception is that the market's going to rally tomorrow, why not buy today," said Hyman.
Shares of Internet portal Lycos (LCOS: Research, Estimates) ended the session 7-1/2 higher at 61-5/8, a 13.9 percent gain on the day. The company is in merger talks with Spanish Internet access provider Terra Networks, a combination that several analysts said would yield substantial benefits for both companies.
Internet investment firm CMGI (CMGI: Research, Estimates), which holds a roughly 17 percent stake in Lycos, added 5, finishing the session 9 percent higher at 60-3/16.
America Online (AOL: Research, Estimates) shares finished 3-1/8, or 5.6 percent, higher at 58-1/2. The company on Monday settled charges that it improperly accounted for certain advertising costs and agreed to pay a $3.5 million civil penalty. America Online currently has a pending merger agreement with Time-Warner, CNNfn's parent company.
Click here to read the full tech stocks report. 
|
|
|
|
|
 |
|
