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Microsoft Flattens Dow but Nasdaq Bounces Into the Green

Led by Yahoo!, the Nasdaq Comp is enjoying a solid advance. With Microsoft and Honeywell hurting, the Dow's not so lucky.

Stocks were wandering aimlessly at midday as the market took its time absorbing a stack of earnings reports dumped on its desk this morning.

Last night's work wasn't even finished yet, judging from investors' continued rough-handed treatment of


(MSFT) - Get Microsoft Corporation Report

. The software giant was off 5.5%, sliding further after an upside earnings report that apparently didn't pass muster with demanding shareholders.

The rest of the tech sector was also looking confused, with the

Nasdaq Composite Index

up 19 to 4150, and the Internet Sector

index up 7 to 1125. Investors also seemed to be taking a general wait-and-see approach to technology stocks and the broader market today.

Amid quieter than usual trading, "the buying continues to contract, and tech is biding its time," said Bill Schneider head of U.S. equity block trading at

Warburg Dillon Read

. On the upside, he said, earnings continue to come in better than expected, and stability in the bond market seemed to be helping out the

S&P 500

, which was lately rising 4 to 1459. The benchmark 30-year Treasury was showing some mettle, rising 12/32 to 92 13/32, putting its yield at 6.72%. (For more on the fixed-income market, see today's early

Bond Focus.)

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"There is a hesitation to do anything that will distract" from the next batch of earnings reports, said Schneider, referring to expected reports from


(IBM) - Get International Business Machines Corporation Report


America Online


, and


(BA) - Get The Boeing Company Report


Amid little discernible market action today, solid earnings reports from

Chase Manhattan



Donaldson Lufkin & Jenrette


were offsetting some of the boredom. The

American Stock Exchange Broker/Dealer Index

was up 0.8%, while the

Philadelphia Stock Exchange/KBW Bank Index

was rising 1.5%.

Drug stocks were showing some muscle, with the

American Stock Exchange Pharmaceutical Index

rising 1.3% after getting hammered yesterday. News that



has held preliminary merger talks with

Procter & Gamble

(PG) - Get Procter & Gamble Company (The) Report

to fend off a hostile


(PFE) - Get Pfizer Inc. Report

had the sector buzzing. And



bounced 5.1% after news it was added to Merrill's Focus One list.

For more on Warner-Lambert's tie-up talk, see

coverage from's

joint newsroom.

In the larger picture, "you are seeing a discipline shift in technology stocks," said Brian Belski, chief investment strategist at

George K. Baum

in Kansas City, Mo. We're starting to see "a lot of the concept or emotionally led Internet stocks losing a little momentum and the bread and butter ones are kind taking their place," said Belski. As the tech world is beginning to change, it's affecting other areas of the market and people are turning to defensive areas," he said, noting the recent show of strength in cyclicals and consumer staples.

Though Belski still thinks tech stocks are going to be strong performers again further on in the year, he said those so-called defensive areas have become "somewhat of the focus for now while tech stocks decide how they are going to be." The upside is that the market gets a chance to broaden out, he said, which is what we are seeing now. "It seems like investors are keying in on the core fundamental trends vs. the greed and the sex appeal associated" with tech stocks, especially in the recent quarter.

Market Internals

Breadth was narrowly mixed on major exchanges on moderately heavy volume.

New York Stock Exchange:

1,354 advancers, 1,563 decliners, 620 million shares. 67 new 52-week highs, 55 new lows.

Nasdaq Stock Market:

2,086 advancers, 1,836 decliners, 947 million shares. 255 new highs, 34 new lows.

Yahoo! Japan Breaks 100 Million Yen

Think U.S. Internet stocks are getting pricey? Take a look at shares of

Yahoo! Japan

, the Japanese-language joint venture of the California-based



and Internet conglomerate



Shares of the online directory jumped as high as 101.4 million yen ($961,000) in early Wednesday trading in Tokyo as investors, traders and speculators enthused about a planned 2-for-1 stock split in May. A dollop of enthusiasm over the growth of the Internet in Japan, where gadget-happy school kids surf the Web and send emails over mobile phones, undoubtedly contributed to the fiery run-up.

By the end of the day, Yahoo! Japan slipped to 99.1 million, but that likely didn't upset early investors. Since debuting in November 1997 at 2 million, the shares have risen 4,855%.

The rise marked the first time a Japanese share has pierced the 100 million yen milestone, a hefty price tag even in Tokyo, which once sported a downtown plot of land, the Imperial Palace grounds, that was estimated to be worth more than the entire state of California.

The U.S. Yahoo! carries a more modest per-share price than its Japanese counterpart, but it's still a hefty one, lately rising 16 7/8, or 5%, to 358. Yahoo! Japan's market cap was $23.1 billion as of Tuesday, while Yahoo!'s was $92.9 billion. Softbank and Yahoo! own 90% of Yahoo! Japan, giving it a very small public float.

Softbank has a holding in Inc.


through a U.S. unit.


Andrew Morse