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Market Update: Dow Ends Lower, While Nasdaq Climbs

<LI>Knight Trading flies on merger rumors.</LI> <LI>On day of deal, J.P. Morgan and Chase end down.</LI> <LI>Intel drops.</LI>

(Updated from 3:12 p.m. EDT)


Dow Jones Industrial Average had a rough time of it today, being hurt by weakness in


(INTC) - Get Intel Corporation (INTC) Report





Even without those two stocks, it wasn't much of a day for the 30-stock average. Weakness in brokerages, PC makers and chip stocks held down the major averages; but the

S&P 500 and

Nasdaq Composite Index ended in positive territory.

The Dow ended 50 lower to 11,183; the S&P was up 3 to 1485, and the Comp was up 45 to 3894. The small-cap

Russell 2000 edged up to 534. Internet Sector

, or the

DOT index, was up 6 to 799.

Both the Dow and the Nasdaq are feeling the impact of Intel's losses. The company was downgraded, along with fellow semiconductor maker

Advanced Micro Devices

(AMD) - Get Advanced Micro Devices, Inc. Report

, by

Banc of America Securities

analyst Richard Whittington. He broadly cited concerns over demand from PC makers and in the case of Intel, delivery problems. Intel was lately down 5.9%, while AMD lost 5.7%. Together, Intel and H-P account for 54 points of negative drag on the Dow.

wrote about the two companies in a

separate piece this afternoon.

Concerns over weakening PC demand are being highlighted this morning by the earnings

warning from electronic components maker

SCI Systems

(SCI) - Get Service Corporation International Report

, which said fiscal first-quarter profits would be lower than expected due to diminished demand. SCI is one of the

New York Stock Exchange's biggest losers today, dropping 15.9% to $47.13.

SCI's two largest PC

customers are hurting.



, down 4.8%, and Hewlett-Packard, off 3.4%.

With the announcement that

Chase Manhattan


plans to purchase

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

, the takeover juice has been squeezed out of the brokerage names, and they're dropping.

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After a hefty round of consolidation that culminated with yesterday's Chase-J.P. Morgan announcement, brokerage stocks are down. There's a sense among traders that the wave of

consolidation may be nearing an end, and if that's the case, the sense is that these stocks are overvalued.

Two of the market's recent big winners, are down today, with

Lehman Brothers


, losing 5.6%, and

Bear Stearns


, off 2.6%. J.P. Morgan itself is down on the merger news, losing 3.4%.

Knight Trading


was flying, up 23.3%, on speculation that the market maker could be

acquired by

Morgan Stanley Dean Witter



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Sector Watch


Nasdaq Telecommunications Index

powered higher on the strength of a 3.8% gain in


(QCOM) - Get QUALCOMM Incorporated Report

and other components. The telecom index lately gained 1.8%.

Transportation stocks were having a strong day. The

Dow Jones Transportation Average

rose 1.4%, and the

Amex Stock Exchange Airline Index

gained 2.6%.

Delta Airlines

(DAL) - Get Delta Air Lines, Inc. Report

gained 2.4%, and

Union Pacific

(UNP) - Get Union Pacific Corporation Report

was lately up 1.8%.


Dow Jones Utility Average

hit a new all-time high of 400.06 today. It was lately slipping 0.1%.

Crude oil has dropped a bit from its recent high, lately at $33.85.

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Bond prices are higher thanks to lower oil prices and growing optimism about the monetary policy outlook. Treasury traders are also paying close attention to the corporate bond market, where more than usual new issues are competing for investor dollars.

While there are no major economic releases today,

fed funds futures are discounting lower odds than ever that the

Fed will hike interest rates again this year. The December fed funds contract is putting the odds of a hike in the rate to 6.75% from 6.5% currently at just 5%, down from 21% yesterday.

The benchmark 10-year Treasury note was lately up 9/32 at 100 2/32, dropping its yield to 5.741%.

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