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Dow Ends Up 130; Nasdaq Down 150

NEW YORK (AP) -- Technology stocks fell for a third straight session today as investors shifted money from the pricey shares that dominated trading in 1999 to blue-chip stalwarts like Caterpillar, 3M and Procter & Gamble.

The Dow Jones industrial average rose 130.61 to 11,253.26.

The Nasdaq composite index, dominated by technology stocks, fell 150.34 to 3,727.20. It was the second largest point loss in history for the Nasdaq, which has tumbled nearly 10 percent since closing at a new record on Monday.

The Standard & Poor's 500 rose 1.34 to 1,403.45.

Advancing issues outnumbered decliners by a 5-to-3 margin on the New York Stock Exchange, with 1,974 up, 1,158 down and 410 unchanged.

NYSE volume totaled 1.08 billion shares as of 4 p.m., vs. 1.07 billion in the previous session.

The Russell 2000 index of smaller companies fell 3.43 to 475.40.

Stocks continued the reversal of fortunes that has marked Wall Street this week. Technology stocks, which helped the Nasdaq composite to an unprecedented 86 percent gain in 1999, have plummeted as investors lock in profits.

Meanwhile, cyclical companies, which thrive in a booming economy but languished last year in the frenzy for technology stocks, are soaring.

"Investors are selling Yahoo! to buy Caterpillar," said Charles Pradilla, chief investment strategist at SG Cowen Securities in New York.

Indeed, Yahoo! was among the Nasdaq's steepest decliners. Qualcomm, the best-performing stock in the Nasdaq and the Standard & Poor's 500 last year, also fell steeply.

While analysts continued to discount much of the technology selloff as long-awaited profit-taking, fears of slowing profits for two high-tech firms depressed the sector today. Personal computer maker Gateway warned late Wednesday its fourth-quarter earnings would miss expectations due to a slowdown in sales. The company blamed Year 2000 computer worries and component supply problems.

Gateway, which fell steeply in extended-hours trading Wednesday, bounced back today. But traders said the company's warning contributed to weakness in other computer makers' share prices. Dell and Apple fell.

Intel fell after Gateway blamed the semiconductor maker for some of its supply problems.

MCI WorldCom was down after influential Salomon Smith Barney analyst Jack Grubman lowered his earnings and revenue estimates for fiscal year 2000. Grubman said the company's revenue is likely to grow 14.4 percent from 1999 to 2000, below his previous estimate of 15.2 percent.

Still, most analysts expect the sector to rebound. Selling this week has been exacerbated by investors' desire to sell now and pay their capital-gains taxes in 2001. Once investors find themselves flush with cash, many will return to the sector that rewarded them so richly in 1999, said Larry Rice, chief investment officer at Josephthal & Co. in New York.

"These stocks will bounce back," he said. "There are too many people who are still eager to buy. And these companies still hold great potential for making a lot of money."

In the meantime, however, cyclical stocks like Caterpillar, 3M and Procter & Gamble thrived amid growing concerns that the Federal Reserve will soon raise interest rates in an effort to stave off inflation. Those stocks are viewed as "safe havens" that are less prone to interest-rate fluctuations.

Investors are now awaiting Friday's monthly unemployment report from the Labor Department, which contains data on wages and the number of jobs created. Any sign of modest or slowing growth could prompt some new buying, analysts said.

Today, the government said its weekly tally of new claims for unemployment benefits rose by 33,000 last week, the largest increase in a year. Jobless claims had fallen by 7,000 in the previous week.

Still, Labor Department analysts stressed that the claims level is often volatile during holiday periods and they cautioned against reading too much into one week's movement in jobless claims.

-- Homer Beanfang (Bats@inbellfry.com), January 06, 2000

Answers

JIT problems surfacing?

-- Homer Beanfang (Bats@inbellfry.com), January 06, 2000.

I'll want to see the new jobless claims THIS week and next...(the first two after rollover...)

-- Mad Monk (madmonk@hawaiian.net), January 06, 2000.

Thanks Homey. NASDAQ down 10% since Monday. Not that this means anything of course...

-- (@ .), January 06, 2000.

There have been JIT problems in computer components since the Taiwan Earthquake. Intel didn't help either, by persuading RAM manufacturers to switch production to RAMbus chips, and then at the last minute finding that their support chip didn't work right.

I'd imagine it's these problems that are surfacing in Q4-99 reports. Any financial effects of Y2K won't surface until Q1-00 report, though big screw-ups will show as delayed orders and empty shelves at retailers before then. I'm not aware of anything having got worse since Xmas (yet?)

-- Nigel (nra@maxwell.ph.kcl.ac.uk), January 07, 2000.