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Nasdaq cracks 4,000 mark
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June 20, 2000: 5:38 p.m. ET
Tech gauge erases nearly all of year's losses, but the Dow takes a hit
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Nasdaq composite index closed above the 4,000 mark for the first time in more than two months Tuesday, as investors selectively returned to the large technology stocks that fueled the bull market of 1999.
Intel, Microsoft, Oracle and Sun Microsystems all rose, wiping out most of Nasdaq's losses for the year.
But the Dow Jones industrial average tumbled more than 100 points, hurt by a decline in shares of Honeywell, which fell for the second straight session following an earnings warning Monday. Investors also fled Dow consumer products makers such as Minnesota Mining & Manufacturing, Johnson & Johnson and Coca-Cola, whose earnings could falter under the weight of the Federal Reserve's six interest rate hikes in a year.
At the same time, analysts explaining the Nasdaq's gains cited the belief that earnings at fast-growing technology companies won't be as crimped by the steeper cost of borrowing, whose upward cycle may be nearing an end.
"We're talking about a thousand-point rally in the past 18 days," Joe Kleinerman, technical analyst at Chase Securities, told CNNfn's market coverage. "This market really has set the stage for what I think will be another test of the March highs."
Still, some analysts say technology stocks are still too expensive and won't be able to post results that reflect these higher prices.
 "The tech companies are going to have to be a lot better than expected to keep this up," Vince Farrell, chairman of Spears Benzak Salomon & Farrell, told CNN's Street Sweep. "I say sell this tech rally."
For Tuesday, at least, the bulls prevailed.
The Nasdaq rose 23.53 points to 4,013.36, coming within 56 points of the 4,069 mark it closed at last Dec. 31. The Nasdaq has not closed above 4,000 since April 11. It first broke through the barrier last Dec. 29.
That gain, which came when the index was up more than 80 percent in the last year, met with much fanfare. Tuesday's milestone, which comes with the index well off its 5,048 high, drew more subdued enthusiasm.
 "A lot of the big names in the Nasdaq were well off their highs and looked like screaming buys," said Terrence Hewitt, analyst at Wall Street Strategies.
Hewitt sees investors moving back into fast-growth companies after punishing them in April and May, in what could be the start of a summer rally.
But the Dow did not fare as well, tumbling 122.68 to 10,435.16. The S&P 500 lost 9.72 to 1,476.28.
More stocks fell than rose. Declining issues on the New York Stock Exchange edged out advancing ones 1,621 to 1,268, as more than 1 billion shares changed hands. Losers topped winners on the Nasdaq by 2,090 to 1,898, on volume of more than 1.6 billion shares.
In other markets, the dollar was little changed verses the euro but fell against the yen. Treasury securities edged lower.
Techs gain
Oracle (ORCL: Research, Estimates) rose 1/32 to 86-1/32 ahead of its quarterly earnings due after the close of trading. The maker of data base software ultimately reported a fiscal fourth-quarter operating profit of 31 cents per share, beating analysts expectations of 25 cents per share.
 Other tech stocks also gained. Intel (INTC: Research, Estimates), which jumped more than 8 percent Monday on positive comments from Lehman Brothers, added 1-13/16 to 138-5/16. Sun Microsystems (SUNW: Research, Estimates) rose 1-1-5/8 to 97-1/16. Microsoft (MSFT: Research, Estimates) gained 1-1/4 to 75-15/16.
Looking ahead, Al Goldman, chief market analyst at A.G. Edwards, sees the Nasdaq hitting 5,050 by year's end. The 24 percent gain, though respectable, would pale to 1999's 86 percent surge.
But Charles Lemonides, chief investment officer at M&R Capital, told CNNfn's Talking Stocks that he's not confident about a sustained Nasdaq rally given the weakness in the Dow. (429K WAV) (429K AIFF)
Much of the Dow's weakness Monday and Tuesday can be blamed on Honeywell (HON: Research, Estimates). Shares of the industrial conglomerate fell 4-1/4 to 36, tumbling to a 52-week low and extending Monday's 18 percent slide. Honeywell warned that it would miss Wall Street expectations for the second quarter.
 Honeywell was the latest "old economy" company to warn about disappointing results for the quarter that ends this month. Last week, warnings from Xerox (XRX: Research, Estimates) and several regional banks weighed on blue-chip stocks. The Dow industrials fell 1.6 percent last week, due in large part to a 265-point drop Friday.
For the year, the Dow is down 9.2 percent, making it the worst performing major U.S. index.
Among other Dow losers, Minnesota Mining & Manufacturing (MMM: Research, Estimates) fell 1-5/16 to 82-3/16, Johnson & Johnson (JNJ: Research, Estimates) lost 1-5/8 to close at 88-9/16, and Coca-Cola (KO: Research, Estimates) declined 1-1/2 to 52-15/16.
 In the day's largest deal, French conglomerate Vivendi agreed to buy Canadian entertainment and spirits company Seagram Co. (VO: Research, Estimates) in a deal worth more than $46 billion in stock and debt. Seagram, the owner of Universal Studios and PolyGram Records, fell 5-15/16 to 58-1/16.
In earnings news, Goldman Sachs (GS: Research, Estimates) said it earned $1.48 per share in its fiscal second quarter, above the $1.30 per share in the year-earlier period and also above the $1.37 consensus of analysts surveyed by First Call. Goldman Sachs fell 2-5/8 to close at 89.
Trade deficit narrows
The nation's trade deficit narrowed in April to $30.44 billion after widening for the last year-and-a-half, the government said Tuesday. Though smaller than March's revised record $30.6 billion deficit, the figure is high and suggests Americans' appetite for overseas good remains strong.
The news didn't change the widely held view that the Federal Reserve will hold steady on interest rates when it meets next week.
"We don't look for a (rate hike) next week, but possibly one in August," Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum, told CNNfn's Before Hours. 
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