Blue chips marked time Monday, but computer-technology stocks surged after news that semiconductor giant Intel had settled an unfair competitive practices dispute with the Federal Trade Commission a day before a trial in the case was to begin.
Wall Street also took heart from an agreement between Brazil and the International Monetary Fund that would give Brazil access to $4.9 billion in IMF loans.
The Dow Jones industrial average, which soared to a record high close Friday, slipped 8.47 points, to 9727.61. New York Stock Exchange volume totaled a moderate 705 million shares.
The broader Standard & Poor’s 500 index added 7.26, to a record closing high 1282.73. But losing stocks outnumbered winners by about 8-7 among NYSE-listed issues.
The Nasdaq composite index jumped 60.51, or 2.6 percent, to 2397.62, led by a $5 gain in Intel, to $119.62. Computer networking developer Novell gained $3.19, to $23.31, on rumors the company may be acquired by Compaq.
Internet stocks had a strong performance. On-line auction service eBay jumped $21.75, to a record high $171. The Internet stock index traded at the Chicago Board Options Exchange rose 3.4 percent.
The Russell 2000 index of small-company stocks added 2.05, to 400.06, the first close above 400 in nearly a month.
“I think the market overreacted on the downside,” said Robert Froehlich, vice chairman at Scudder Kemper Investments. “The market sold off much more than it needed to, and the story of the last couple of days is the market reclaiming what it shouldn’t have given up in the first place.”
On the other hand, Froehlich said, “10,000 (on the Dow industrials) is a major psychological barrier. It’s going to take some special impetus to get it through there. It’s going to take a dramatic special event, like an interest rate cut in Europe. Short of that, it’s going to be hanging around here for a while.”
Soon, companies will begin to issue so-called preannouncements of first-quarter results. But Froehlich does not expect a rush of first-quarter profit warnings in the weeks ahead. “We’re going to have strong earnings in the first half of the year,” he said.
Douglas Cliggott, chief equity strategist at J.P. Morgan, said Monday he expects strong corporate profits for the next two years. He expects the S&P 500 index companies to post an aggregate increase in earnings per share this year of 8 percent, up from 3 percent in his previous forecast. He sees a 10 percent increase in S&P 500 EPS next year, up from 8 percent in his previous estimate.
He cited the stronger-than-expected results in the 1998 fourth quarter and the unexpectedly robust growth in the U.S. economy this year. He also foresees a rebound in certain key commodity prices, which could boost profits for commodity-based stocks that have been depressed for several years.
On the flip side, after the close of Nasdaq trading Monday, Intel competitor Advanced Micro Devices said it expects to post a bigger-than-expected loss for the first quarter and will eliminate 300 jobs in a restructuring move. Last month, AMD had warned of a first-quarter operating loss, but the company said Monday the loss would be “significant.”
Separately, AMD agreed to demands by giant pension fund manager TIAA-CREF to increase the representation of independent members on its board of directors. In response, TIAA-CREF withdrew a shareholder proposal that would have required the AMD board to have a majority of members who are not current or former employees of the company.
Brazil rebound: Stocks in Brazil jumped 3.4 percent, to their highest level since early August. According to the Bovespa index of stocks traded on the exchange in Sao Paulo, stocks in Brazil, considered a basket case just a few months ago, have advanced 44 percent so far this year.
Brazil, one of the hot spots in forecasts of 1999 economic and financial trends, got a little cooler Monday. Officials of the nation and the IMF agreed on terms for a $4.9 billion disbursement–part of a $41.5 billion IMF support package–to shore up Brazil’s beleaguered finances.
Treasury Secretary Robert Rubin hailed the IMF agreement and said the United States is ready to provide additional financial aid to Brazil in conjunction with fresh commitments by
Brazil’s private sector banks.
Treasury auction: The Treasury’s weekly auction of 3- and 6-month bills brought a discount rate of 4.51 percent on 3-month bills, which equals a coupon-equivalent rate of 4.64 percent, and a discount rate of 4.54 percent on 6-month bills, equal to a coupon-equivalent rate of 4.72 percent.
Local news: Communications infrastructure developer Andrew, based in Orland Park, fell $1, to $13.37, after the company said sales and profits for its fiscal second-quarter ending March 31 would be less than Wall Street expects. Floyd English, chief executive officer, cited the devaluation of the Brazilian currency, the real, and an unexpected slowdown in sales in the United States.
– MYR Group, Rolling Meadows, an electric and telecommunications construction firm, said its revenues probably would drop about 10 percent this year, compared with 1998, because of the completion of a major project in Las Vegas. The company boosted its quarterly dividend to 37.5 cents per share from 35 cents, payable March 31 to shareholders of record March 15. Its stock rose 62 cents, to $10.87.
– After the close of NYSE trading, Chicago-based Tribune, which publishes the Chicago Tribune, purchased 1.5 million of its shares as part of an ongoing stock repurchase program. Tribune gained 37 cents, to $66.56, in Monday’s trading.
