Eric Wahlgren
NEW YORK: The Nasdaq composite index closed above the 4,000 mark for the
first time since April on Tuesday, leaving blue-chip stocks in the dust as
investors bet that technology companies will deliver good results despite a
slowing economy.
"It is a two-tiered market–tech and everything else, said Cantor
Fitzgerald chief market analyst Bill Meehan. "People are worried that the
slowing economy will hurt earnings and that you are not going to get the same
performance out of non-tech stocks, even if there is no slowdown."
The blue-chip Dow Jones industrial average lost 122.68 points, or 1.16 per
cent, at 10,435.16, with Honeywell International Inc., the diversified
conglomerate, again largely to blame. The damage to Honeywell's stock from a
profit warning on Monday continued, with Honeywell falling 3-7/8 to 36.
Besides Honeywell, other old-line stocks were pressured by similar concerns
about the outlook in a slowing economy, including Minnesota Mining &
Manufacturing, another conglomerate, down 1-1/8 at 82-3/8. Car colossus General
Motors Corp. was off 2-1/4 at 62-3/16.
But the tech-stacked Nasdaq composite index posted its fourth higher close in
a row, climbing 23.53 points, or 0.59 per cent, to 4,013.36. It was the index's
highest finish since April 11, when it settled at 4,055.90. It is now off 1.37
per cent for the year.
The familiar cast of technology companies led the way with Intel Corp., the
world's largest computer chip maker, adding 1-13/16 to 138-5/16.
The semiconductor sector grabbed onto its coattails, sending the Philadelphia
Stock Exchange semiconductor index up by 2.42 per cent.
Business software company Oracle Corp. gained 3/64 to 86-3/64 ahead of its
earnings report, which came after the close.
Broader measures of the market headed lower. The Standard & Poor's 500
index fell 9.72 points, or 0.65 per cent, to 1,476.28, while the Wilshire 5000
index declined 38.68 points, or 0.28 per cent, to 13,818.11.
Oil stocks slipped ahead of a key meeting on Wednesday in Vienna of the
Organization of Petroleum Exporting Countries, which will decide how much
additional production is needed to bring down high oil prices. Standard &
Poor's international oil index was off 0.74 per cent.
In general, the shares of auto manufacturers, heavy machinery companies and
other old economy companies sagged, while software companies, semiconductor
makers and entertainment groups rose.
"It looks like the Nasdaq has a little further to go in its rally,"
said Rutherford Brown and Catherwood managing director Thom Brown. "I think
we've been seeing this dichotomy in the market almost all year. It is kind of
just business as usual."
Early in the session, US trade figures for April showed that consumer demand
for imports remains strong but the trade deficit narrowed a bit from the
previous month's record high. The central bank is worried that strong consumer
demand will fuel inflation.
But Federal Reserve Governor Edward Gramlich said on Tuesday that unit labor
costs in the economy are reasonably stable and the trade-off between employment
and inflation rates is now better than it was in the past.
Wall Street will hear from Federal Reserve Chairman Alan Greenspan on
Wednesday, which will be exactly one week before the central bank is expected to
announce whether it will raise interest rates again. The Fed has boosted rates
six times since last June.
On Wednesday, Greenspan will testify before the Senate Banking and
Agriculture committees on the Commodity Futures Modernization Act at 1400 GMT.
(C) Reuters Limited 2000.