With a (barely) positive close on Friday, the Nasdaq capped a two-week winning streak. With all the talk about a possible recession and a slowdown in corporate growth, are investors looking at a fad -- or a lasting trend?
At least some bullish analysts see the beginnings of a lasting effect. "It's not up, up and away. But we've certainly turned the corner on the Nasdaq," said Donald Selkin, chief market strategist at Joseph Gunnar & Co. Selkin noted that breadth on the Nasdaq was expanding in favor of advancing stocks.
"Some marquee companies are doing okay," he said. "Former leaders are returning to a leadership position." Selkin pointed to recent strength in former technology stock leaders: America Online, Microsoft Corp. (MSFT ) and International Business Machines Corp (IBM . Selkin is bullish that interest in technology by the end of the year will be at full throttle and the stocks will outperform defensive issues as the Federal Reserve's easing policy starts to show its influence on the economy.
A run-up inspired by solid fourth quarter earnings from software giant Microsoft died out, but left the Nasdaq up slightly. The Nasdaq Composite edged up 1.93 points, to 2,770.42.
On Thursday blue-chip tech giant IBM led a tech rally after it said it beat earnings estimates in the fourth quarter.
Several high-tech giants reported earnings that met or beat expectations after the closing bell Thursday. Microsoft, a component of the Dow Jones industrial average, reported quarterly profits virtually unchanged from a year ago, in line with lowered forecasts. Canada's Nortel Networks Corp. (NT ), a supplier of fiber-optics system equipment, gave some strength to the tech-laden Nasdaq. Nortel confirmed its forecast for 2001 and posted fourth-quarter results that matched market expectations.
Shares of computer network company Sun Microsystems (SUNW ) were sold off after it posted second quarter earnings per share of $0.16 compared with $0.10 from operations on a 44% revenue rise, which is lower than analysts' expectations. Sun was the most actively traded issue on the Nasdaq.
Behind Sun in volume, were Microsoft and tech favorites Cisco (CSCO ) and Intel(INTC ). All gained ground as investors scooped up tech bellwethers.
The Dow, on the other hand, was not as fortunate as weakness in Home Depot (HD ) and Catepillar (CAT ) wiped away almost all of the index's gains yesterday.
Home Depot was the Dow's weakest spot. The do-it-yourself retailing giant revised down revenue forecasts, citing a declining economy and price deflation in lumber and building materials expected to continue through the first half of 2001. Caterpillar, a construction equipment firm, weighed on the blue-chip index after it said profits will decline this year. Microsoft's strength helped offset the index' losses.
In recent days, even as earnings reports look mostly bad, stocks have been helped along by optimism for continued interest rate cuts from the U.S. Federal Reserve. The next Fed meeting will be held on January 30 and 31. The Street widely expects a rate cut of at least 25 basis points. The Dow Jones Industrial Average lost 90.69 points, or 0.85%, to 10,587.59. The broader Standard & Poor's 500 index lost 5.42 points, or 0.40%, at 1,342.55.
U.S. Treasuries ended lower after the University of Michigan's preliminary reading of consumer sentiment showed a sharp decline, hitting its lowest level in more than two years in December. The index fell to 93.6 from 98.4, a decrease which bolsters hopes that the Fed will aggressively cut interest rates at its policy-setting meeting at the end of January.
In other economic data, the latest trade debt report showed the trade deficit in November narrowed to $32.99 billion narrowed, down from $33.55 billion in October.
Stocks in the News
Internet incubator CMGI Inc. (CMGI ) said it is not likely to meet previous revenue or cash earnings per share targets for fiscal year 2001.
Internet auction site eBay Inc. (EBAY ) posted fourth quarter EPS of $0.09 compared with $0.02 from operations on an 81% revenue rise. Goldman Sachs raised its estimates on the company.
European markets finished mixed. London's Financial Times-Stock Exchange 100 index ended virtually unchanged, down 0.60 points, or 0.01%, at 6,209.30. In Germany, the DAX Index closed up 15.77 points, or 0.24%, to 6,651.43. Meanwhile, France's CAC 40 ended down 14.43 points, or 0.25%, at 5,845.73.
The Asian markets finished up. Japan's Nikkei ended higher by 115.20 points, or 0.83%, at 13,989.12. Hong Kong's Hang Seng Index finished with a heady gain of 404.80 points, or 2.61%, at 15,933.55.
By Amy Tsao