Archive for Tuesday, October 31, 2000

Investors buy blue chips

Concerns about slowing economy pull down Nasdaq

October 31, 2000


— Investors fled the volatile technology sector for the relative safety of blue chip stocks Monday, sending the Dow Jones industrials to their second straight 200-plus point gain.

The market's enthusiasm for aluminum, construction equipment and financial services stocks wasn't enough to lift technology issues out of their malaise. Earnings reports dogged stocks even as the end of the third-quarter earnings season approached.

The Dow closed up 245.15 at 10,835.77, a gain of 2.31 percent, on the heels of a 210-point gain Friday.

The tech-focused Nasdaq composite index struggled, falling 86.96 to 3,191.40, after being off nearly 130 points earlier in the day.

The Dow rose to its highest level since late September, despite a 430-point plunge less than two weeks ago that sent it below 10,000 for the first time since March.

"It looks like this is a good thing," said Brian Belski, a fundamental market strategist with U.S. Bancorp Piper Jaffray, who believes a strong advance in blue chips foreshadows broader market gains. "The bulk of the recent downside in tech stocks is really composed of stocks that have not really been sold off. Microsoft is up."

Microsoft rose $1.38 to $69.06. Aluminum producer Alcoa jumped nearly 14 percent, up $3.44 to $28.44, while International Paper picked up $2.50 to close at $35.75. All three are Dow components.

But the optimism was not universal Monday. In a continuation of what has been the pattern since earlier this month, concern about the long-term profitability drove many investors to unload high-tech shares in favor of blue chips.

"I think people are fed up with technology and they shouldn't be. It's the only growth sector out there," said Barry Hyman, chief investment strategist at Weatherly Securities. "People instead have sought the safety of the Dow, looking at financials and consumer staples to play the market."

Technology stocks generally declined. Qualcomm tumbled $6.75 to $68.13 after one of its primary customers, Globalstar Communications, missed Wall Street estimates for third-quarter earnings. Globalstar plunged $3.63, or 60 percent, to $2.38.

Cisco Systems fell $2.63 to $48.06 after Lehman Brothers cut the stock's 12-month price target to between $60 and $65 instead of $90.

Among other blue chip winners, American Express rose $2.63 to $58.44 and heavy- equipment maker Caterpillar rose $2.06 to $34.94.

The shift into blue chips reflected investors' anxiety about the effect the cooling economy will have on earnings in the coming quarters. They are searching for stocks viewed as sure bets for growth, even if it's slower growth.

"Whenever the market starts worrying about a slowdown in the economy, it goes after companies that will continue to grow their earnings no matter what," said Gary Kaltbaum, a technical analyst at JW Genesis. "The market is as defensive as I've seen in years."

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