20000121

Dow hurt by Microsoft's drop; Nasdaq ends at record

NEW YORK: US stocks ended mixed on Wednesday with the Nasdaq market striking its second record close this year on technology results, while the blue-chip index sank, mostly on software giant Microsoft Corp.'s tepid outlook.

"Earnings in general have been pretty strong," said Francis Gannon, senior portfolio manager at SunAmerica Asset Management. "I think what we are seeing in the market today is classic earnings volatility. Microsoft is the big thing bringing down the Dow."

The Nasdaq Composite index finished up 20.48 points, or 0.50 percent, at 4,151.29, breezing past its old high of 4,131.15 reached on Jan. 3 -- the first day of trading in the year 2000.

Helping the tech-heavy index were semiconductor equipment stocks such as Teradyne Inc., which finished up 7-7/16 at 77-1/4, after reporting strong order volume.

Internet stocks also nudged the index higher with TheStreet.com's Internet index up 1.25 percent.

The Dow Jones industrial average, meanwhile, fell for the second day in row, shedding 71.36 points, or 0.62 percent, to 11,489.36. Microsoft, the world's largest software company and a Dow component since November, accounted for more than half of the drop.

Microsoft, the most heavily traded stock on Nasdaq, was off 8-5/16 at 107 after posting fiscal second-quarter earnings that slightly topped expectations, but gave a restrained view of the future.

In the broader market, advancing stocks were even with declines with more than 1.06 billion shares traded on the New York Stock Exchange. There were 96 stocks at new highs and 83 at new lows.

On Nasdaq, advancing stocks beat out declines by about 22 to 18 with more than 1.64 billion shares traded. There were 317 stocks at new highs and 53 at new lows.

Another big drag on the Dow was industrial conglomerate Honeywell International Inc., which completed its merger with AlliedSignal Inc., in December. Honeywell stock slid 5-3/4 to 53-3/4 despite earnings that matched expectations.

"(Microsoft) can't help but have some kind of effect on the market," said Pierre Ellis, an economist at Primark Decision Economics. "They are a real bellwether. Even though the profit outlook out there for companies is pretty good, there is still a lot of uncertainty about whether interest rates will be heading higher."

In general, banking, entertainment, semiconductor and gaming stocks were higher despite mounting fears that the US Federal Reserve will get tough on inflation this year by jacking up interest rates by a greater-than-expected amount. Gold and electronic instrument shares were lower.

The broader Standard & Poor's 500 index was up 0.76 of a point, or 0.05 percent, at 1,455.90, after moving in and out of negative territory throughout the morning. It remains less than 14 points off its high of 1,469.25 reached on Dec. 31.

Financial stocks gained after several US investment banks and brokerage firms posted strong quarterly earnings, fuelled by fees from advising companies on mergers and a surge in stock trading by individual investors.

Among them, Donaldson Lufkin & Jenrette and Bear Stearns Cos. Inc. both reported record or near-record results for the December quarter of 1999.

Bear Stearns' stock was up 1 at 43, while DLJ stock was down 1 at 48-3/4 after trading as high as 51-5/8 earlier in the day.

Also helping the financial sector, the 30-year US Treasury bond was up 12/32 with the yield dropping to 6.72 percent, a day after it hit a two-and-a-half year high and closed at 6.75 percent on soaring oil prices.

Crude oil futures on the New York Mercantile Exchange remained at nine-year highs on Wednesday.

But the US Treasury market appeared to shrug off this news and a report of stronger-than-expected US housing data for December.

Analysts said players, at least briefly, lost their taste for selling.

Among the Dow components reporting earnings on Wednesday, aerospace giant Boeing Co. was up 2-9/16 at 47-9/16 after topping Wall Street expectations.

United Technologies Corp., another Dow component, which makes elevators, escalators, and heating and cooling systems, slipped 2-1/16 to 60-11/16 after reporting its fourth-quarter earnings.

Forest products company Weyerhaeuser Co. dropped 3-1/16 to 63-1/2 after it said it had doubled its fourth-quarter earnings but missed estimates.

Other heavyweights active ahead of their earnings reports, expected after the market's close, included computer makers International Business Machines Corp. and Apple Computer Inc. IBM slipped 1/16 to 115-1/2 while Apple rose 2-5/8 to 106-9/16.

Internet service provider America Online Inc., which last week announced a merger with Time Warner Inc., the biggest such deal on record, was up 3-1/4 at 64 ahead of its earnings announcement. Time Warner strengthened 4-3/4 to 86-1/4.

Despite the mixed day, the Russell 2000, a measure of smaller companies' stocks, closed at an all-time high of 520.02, rising 6.56 points or 1.28 percent.

"The fourth-quarter earnings are behind us, and in an expensive market, there are still a lot of good stocks out there," said Charlie Crane, the chief market strategist at Key Asset Management. -Reuters