Intel torpedoes tech stocks

NEW YORK: US blue-chip stocks closed higher on Tuesday, but technology shares

fell sharply after a Wall Street house warned that top computer chip maker Intel

Corp. could feel the pinch of weaker sales.

Bonds slid in sluggish trade as oil prices rushed to fresh 10-year highs amid

fears that an expected OPEC supply hike may fail to reduce price pressures in an

overheated market.

The euro tumbled to fresh lifetime lows against the Japanese yen and came

within a hair of its record lows against the dollar.

"That Intel downgrade set the stage for technology stocks to really take

it on the chin," said, Wall Street Strategies head analyst Charles Payne.

But blue-chip shares eked out a modest gain with the help of Coca-Cola Co.,

which rushed higher after the soft-drink giant said it would meet Wall Street's

profit expectations for the third quarter on increased shipments.

The Dow Jones industrial average rose 21.83 points, or 0.19 per cent, to end

at 11,260.61.

The technology-heavy Nasdaq Composite Index finished the session down 91.15

points, or 2.15 per cent, at 4,143.18, based on the latest available data. The

index was still up 1.82 per cent for the year after having made sizable headway

in August.

The Standard & Poor's 500 Index was down 13.69 points, or 0.9 per cent,

at 1,507.08.

Coca-Cola helped keep the Dow afloat with a gain of $1-11/16 at $55-15/16.

Financial and retail stocks also helped bolster the Dow as investors picked

shares of some of the sectors' more traditional companies, analysts said.

"Investors know they can count on these companies to provide the

earnings that would justify their prices right now," Payne said.

Intel sagged on news that US Bancorp/Piper Jaffray analyst Ashok Kumar cut

his rating on the world's No. 1 semiconductor manufacturer to a "buy"

from a "strong buy," citing unexpected weakness in demand.

Kumar also spoke bearishly of other computer makers like Dell Computer Corp.

and Gateway Inc.

Intel–the most actively traded on the tech-heavy Nasdaq–fell $4-11/16 to

$71-1/16. Dell was off $2-1/16 at $41. On the New York Stock Exchange, Gateway

plunged $4.71, or 6.86 per cent, to $63.97.

Also pressuring the Nasdaq market was the communications firm WorldCom Inc.,

which saw its shares slump $3-3/16 to $33-3/4 after it announced its plan to buy

Intermedia Communications Inc. But Intermedia benefited from news of the deal,

climbing $8-39/64 to $31-31/64.

At the same time financial shares floated higher amid continued merger

speculation after Swiss bank Credit Suisse last week said it was buying US

investment bank Donaldson, Lufkin & Jenrette.

Dow component JP Morgan & Co. viewed as a prime takeover target, rose

$6/16 at $159-15/16. Citigroup was up 4/16 at $57-15/16 and American Express Co.

rose $1-5/16 to $59-3/4.

On the Nasdaq, business-to-business companies like Commerce One, which jumped

$3-1/4 to $69-1/4, were lifted after Salomon Smith Barney made positive comments

on it and a number of other companies in the same sector, traders said.

The day's action dashed Wall Street's hopes that the market would extend

Friday's rally on news that the tight US labor market softened in August.

The data had heightened hopes that the US Federal Reserve was done with its

more than year-long series of interest-rate increases aimed at keeping inflation

in check.

"For the most part, this happens to be a correction and not the

beginning of something significant," said Fahnestock & Co chief

investment strategist Joseph Barthel.

"The market had a relatively good tone because it has become

conventional wisdom that rates have peaked for the cycle and, if anything, you

will see the market move higher right up through the (November presidential)

elections and maybe even after that," Barthel said.

The benchmark 30-year US Treasury bond fell 3/32, or 93.75 cents on each

$1,000 of face value. The yield, which moves in the opposite direction, rose to

5.67 per cent from 5.66 per cent on Friday. The 10-year Treasury note edged down

1/32, yielding 5.69 per cent, only a hair off its lowest point since July 1999,

reached on Friday.

The euro slumped to a record low at 93.72 yen, amid improved sentiment about

Japan's economic prospects. The euro settled at 89.02 cents, down from 89.75

cents late Friday. The dollar edged up to 105.78 Japanese yen from 105.76 yen.

Soybean futures soared amid expectations that this year's US production will

be trimmed by scorching heat in the Delta region. At the Chicago Board of Trade,

soybeans for November delivery rose 9-1/4 cents to $5.12-3/4 per bushel, the

highest close for the contract since scaling to $5.28-1/4 on June 9.

Crude oil for October delivery settled at $33.83 a barrel, up 45 cents on the

day.

Across the Atlantic, October Brent crude hit a fresh 10-year high of $33.00 a

barrel in London before last trading at $33.98, up 14 cents.

Overseas, London's FTSE 100 closed at 6,752.5, down 45.6 points or 0.67 per

cent. In Tokyo, the 225-issue Nikkei average ended down 235.94 points or 1.41

per cent at 16,452.27.

(C) Reuters Limited 2000.