Blue Chips Bounce Back
Blue-chip stocks bounced back Tuesday from a steep slide with the profit-taking behind Monday's sharp downturn easing just as the Dow slipped below 9,000.
The Dow Jones industrial average advanced 16.99 points, or 0.19 percent, to 9,133.54. It fell as much as 128.73 points before investors began buying marquee-name computer shares, spurring buying in other segments.
"You had the market down in the morning and then Cisco, Microsoft, Intel, WorldCom, and Dell turned positive," said Scott Bleier, chief investment strategist at Prime Charter Ltd. "There's the big CS First Boston technology conference going on in Arizona, and those conferences are usually lovefests. And that's what I think took the market back up."Leading technology stocks posted multipoint gains. International Business Machines rallied 4 3/4 to 169 7/8, Intel 7 3/8 to 115, Microsoft 7 1/2 to 129 1/2, and Cisco Systems 4 3/8 to 79 3/4.
Sun Microsystems (SUNW) added 5 7/8 to 79 15/16. PaineWebber's Investment Policy Committee added Sun to its "highlighted stocks" list. EMC (EMC) gained 4 5/8 to 77 1/8 after SoundView Financial boosted its price target on the data storage specialist.
Internet stocks, Monday's big losers, rebounded after earlier losses. Among electronic commerce names, eBay added 9 5/8 to 207 1/4, Cyberian Outpost 1 7/8 to 27 3/8, Amazon.com 17 1/2 to 209 1/2, and Beyond.com 3 1/8 to 24 7/8. Books A Million dipped 5 to 24 1/2.
WavePhore (WAVO) leaped 7 1/2, or 97 percent, to 15 1/4. It launched an electronic commerce channel, the WaveTop Store, and established nine initial merchants as part of the online mall.
Bluefly (BFLY) soared 6 1/8, or 41 percent, to 20 15/16. The operator of online fashion outlets will open a co-branded retail site on Yahoo! Shopping.
Gains in Internet portal shares were more subdued. Yahoo! firmed 14 1/4 to 206 1/4 and America Online 2 3/8 to 89 15/16.
"The Internet stocks have basically shot their loads," Bleier said. "These stocks remind me of the investment pools of the 1920s, when groups of investors wuld corner a stock, lock up their supply, and run the stock up. Then the investing public would get in, since there were momentum players back then also, and they would dump the stock to the momentum players. This is similar to what's happening today with the Internet stocks.
"The Internet is changing the face of commerce, there is no doubt," he said. "But this is not the second coming. These stocks will all be considerably lower. Maybe less so with America Online because it's the number one institutional holding."
"In our opinion, the market's recent spectacular advance from the Oct. 8 low is not over," Ralph Acampora, director of technical research at Prudential Securities, said in a research brief. "Any pause could be deemed a buying opportunity, so an aggressive investment posture is warranted.
"We believe that due to the market's upward momentum and the impressive leadership, excluding the Internet stocks, the odds are better than 50-50 that the DJIA will reach 10,000 by the end of the year."
In Tuesday's market indicators:
- The Standard & Poor's 500 Index rose 1.0 percent.
- New York Stock Exchange declining issues outdid gainers by 16 to 15.
- On the Big Board floor, volume swelled 14 percent to 787 million shares.
- The Nasdaq Composite advanced 2.8 percent. Declining issues led advancers by 22 to 17 in the Nasdaq Stock Market. Volume totaled 1.02 billion shares.
- The Russell 2000 Index of small-company stocks gained 0.2 percent.
- In the bond market, the 30-year Treasury advanced 10/32, to yield 5.050 percent.
Among the companies in the news:
- Exxon (XON) announced plans to buy Mobil (MOB) for about $77 billion in stock. The deal would be the biggest corporate hookup ever. Shares of Exxon, the largest U.S. oil concern, lost 3 1/4 to 71 3/4, while stock of Mobil, the second-biggest U.S. oil interest, sank 2 1/4 to 83 3/4.
- Belgium's Petrofina SA (FIN) spurted 8 1/8 to 48 13/16. Total SA (TOT), a French oil concern, will buy 41 percent of the company for $12.7 billion in stock. Total shares sank 5 5/8 to 55 1/2.
- Pacific Sunwear (PSUN) swooned 1 9/16 to 13 1/4 after divulging that November sales at outlets open a year or more declined 1.6 percent from the year-ago figure. The apparel retailer also set a buyback plan of up to 1 million shares of its stock.
- Starbucks (SBUX) gained 3 15/16 to 50 1/16. The coffee retailer said sales at stores open at least a year grew 6 percent in November. Lehman Brothers analyst Mitchell Speiser boosted his price target to $67 a share from $52.
- Twinlab (TWLB) dropped 3 5/8, or 22 percent, to 13. The nutritional supplements producer steered analysts to expect fourth-quarter earnings of 23 cents to 26 cents a share. Most observers had forecast 41 cents. Twinlab is experiencing slowing sales as well as some production problems related to its TruHerb line of products.
- Computer disk drive stocks, hot performers since the Oct. 8 market lows, steamed higher, with Western Digital jetting 4 3/4, or 36 percent, to 17 13/16. The company's chief executive, speaking at the Credit Suisse First Boston technology conference in Arizona, said product demand is firming.
- Other disk drives rallied. Seagate Technology tacked on 2 1/4 to 31 3/4, Quantum 1 3/4 to 23 7/8, Read Rite 1 3/4 to 15 3/16, Storage Technology 1 5/8 to 36 5/8, and Hutchinson Technology 1 3/16 to 32 1/8.