The stock market displayed a dual personality yesterday, as thetechnology-heavy Nasdaq index -- driven by speculation in Internetstocks -- rose 1.7 percent to its seventh consecutive record close,while other indexes slumped after reaching highs Friday.
The Dow Jones industrial average yesterday was off 23.43 points,closing at 9619.89, while the broader Standard & Poor's 500 lost11.21 points; declines in both indexes were less than 1 percent aftera day in which the market overall opened on the downbeat amidprofit-taking after Friday's record close.
While the market overall was flat, the Nasdaq surged by 40.18points, closing at 2384.59. Oddly, the index rose despite a 2 3/8decline in its dominant stock, Microsoft Corp., which closed at 1471/2.The market, analysts said, is being led by speculation in Internetstocks, which may be boosting the shares of some of the country'slargest technology companies. Computer giants Intel Corp., CompaqComputer Corp., and Dell Computer Corp. also had strong gainsyesterday."It just gets more incredible every day," said Barry Hyman, seniorequity analyst at Ehrenkrantz King Nussbaum.Blue-chip stocks, which had strong gains last week, were draggeddown by a softer dollar, which has begun to prompt concern in thestock market because it is helping to push interest rates higher.Rising rates are bad for stocks because they raise corporations'operating costs and cut into earnings.The dollar was trading as low as 108.22 yen -- a 28-month low forthe US currency. It was down from 111.32 yen late Friday. Yields onthe benchmark 30-year Treasury bond was 5.30 percent, up from 5.27percent late Friday.Jeff Davis, chief investment strategist for State Street GlobalAdvisers, a division of State Street Boston Corp., interpretedinvestors' moves into stocks as General Motors, which rose 6, closingat 86 1/16, as "defensive." The auto maker expects its new full-sizepickup trucks to generate higher profit margins.The market's big gainers and losers also reflected the feeling ofconfusion among investors. While GM was up, Campbell Soup Co., whichsaid profits are under pressure, was down 7, closing at 45 1/4. WhileHasbro was up 1 3/8 at 35 11/16, Revlon Inc. was down 43 3/4 cents at18 1/2.Internet stocks were driving a general rise in tech stocks.Professional investors increasingly believe the frenzy may be causedby individuals who are trading the stocks over the Web, rather thanthrough large Wall Street investment houses."We find it difficult making money in these stocks," said CharlesClough, chief investment strategist for Merrill Lynch & Co. "So muchis traded on the Internet that we don't have the volume to holdpositions. The fact they're traded on the Internet makes themthin."Dallas-based Broadcast.com rose 87 9/16, closing at 285 1/16;Yahoo Inc. rose 70 7/8, closing at 414 1/2; and Amazon.com rose 243/8, closing at 184 5/8. America Online was up 17 1/2 at 164.State Street's Davis noted that the market capitalization of theInternet bookseller, Amazon.com -- now at more than $23 billion -- isnearly rivaling the market capitalization of Merrill Lynch.Davis is concerned about the increasingly narrow focus on high-tech stocks."The reality is technology has real leadership in terms of cashflows, in terms of obsession with retail buyers. There's a lot ofmomentum," Davis said.But the overall market's rally is "getting narrower and narrower,"and once-strong sectors such as health care and financial stocks arelosing importance, he added.For the year, the Nasdaq has risen 8.75 percent, compared with a4.78 percent increase in the Dow and a 2.82 percent rise in the S&P500.Larry Wachtel, market analyst at Prudential Securities, said bluechips were also pulling back after making strong gains last week.The Dow gained 5 percent in the first trading week of the year.
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