Monday's Market: Dow Soars to Triple-Digit Gains; Nasdaq Manages Modest Bounce

The Dow enjoyed a broad-based rally; on the Nasdaq, meanwhile, biotech soared on good human genome news but other sectors lagged.

Author:: Eric Gillin
Publish date:: Feb 12, 2001 4:48 PM EST

The

Dow Jones Industrial Average -- up 165.32 to 10,946.77 as a broad collection of blue-chips rallied. The

Nasdaq Composite Index -- up 18.8 to 2489.7 on the strength of biotechnology and a bounce in chipmakers.

Federal Reserve chairman Alan Greenspan -- up tomorrow, when he delivers the

Humphrey-Hawkins testimony to the

Senate Banking Committee

meeting.

In this twice-yearly speech, Big Al talks shop with elected officials and could make some waves, especially during the question-and-answer session. Last year, Greenspan helped the Comp drive to a record single-day point gain and record close after saying there was a correlation between rising productivity and skyrocketing stock prices. A Q&A could require Greenspan to discuss why the Fed made deep cuts to the federal funds rate in January and what's in store going forward.

Meanwhile, today, the Dow rebounded from last week's selloff, adding more and more gains as the afternoon wore on. A late-day surge in

IBM

(IBM) - Get Report

Honeywell

(HON) - Get Report

and

General Electric

(GE) - Get Report

helped the Dow to "stick the landing." You know, just like the gymnasts do.

This is the second Monday in a row that the Dow has posted a triple-digit gain. A broad collection of blue-chips rallied, led by upside swings in

Johnson & Johnson

(JNJ) - Get Report

and

Wal-Mart

(WMT) - Get Report

. Twenty-five of the industrials were in the green.

Wal-Mart gained $3.05 to $53.45, taking part in a speculative retail rally. Many people are keeping a close eye on this sector to determine how consumer confidence levels are doing. It's the canary in a coal mine of sorts. With retail sales data emerging tomorrow, and a slate of earnings from many retail names to come on Thursday -- chased by Wal-Mart's release on Feb. 20 -- traders were making bets, hoping to sell into the news.

The

S&P Retail Index

rose 3.7%.

Meanwhile, the Comp gained largely on the back of a biotechnology rally, but drew critical support late in the afternoon when large-cap tech, disk drive peripherals and semiconductors made an upswing.

After sending biotech lower in the final three sessions last week, traders returned to the turrets and were gunning for a rally in the sector. The

American Stock Exchange Biotechnology Index

rose 4.4%, a strong performance that stands in sharp contrast to recent action. In the last ten sessions, the BTK, as the biotech index is known, has only improved in two sessions, today and on Feb. 6.

Celera Genomics

(CRA)

was the catalyst for the move, having announced that its research showed that there are fewer than 30,000 genes in the human body. The company also said that all humans are nearly identical when it comes to genetics, with only 800 letters in the more than million that make up the mapped human genome showing differentiation. (The company did not speculate on how Michael Jackson ended up so odd.)

Celera gained $6.15, or 14.8%, to $47.75 on the move. But the rest of the biotechs also rallied on the news, perhaps because of their battered condition, but maybe because these new findings will make it easier to find new genetic-based cures for conditions. Prior to Celera's findings, estimates for the number of genes in the human genome ran as high as 140,000. Those companies looking to isolate a genetic needle can do so in a smaller haystack.

Your big winners:

Alexion Pharmaceuticals

(ALXN) - Get Report

, a biotech drugmaker, up 4.5% to $38.75.

Molecular Devices

(MDCC)

, which makes equipment used to measure the development of drugs, gained 2.4% to $74.25.

Myriad Genetics

(MYGN) - Get Report

, which sequences genes in order to isolate possible candidates for treatment, gained 8.6% to $72.12.

Everything else in tech was pretty mixed. A bleak-sounding report from networking equipment maker

Emulex

(EMLX)

threw more blood in the waters, keeping would-be swimmers out of the deep end. This morning, the company, which competes with

QLogic

(QLGC)

Computer Network Technology

(CMNT)

and big-name

Hewlett-Packard

(HWP)

, said that third-quarter earnings would suffer if companies keep deferring orders. Fiber channel products, those gizmos and gadgets that provide higher performance connections over networks, was the key area affected by deferrals.

So, Emulex dropped 48.3%. And unlike the last time it fell, back when a fake press release took the company down more-then 50%, today's news was painfully true. Rival QLogic lost 21.2%, while both Computer Network and H-P were lower.

Couple the Emulex warning with a cautious outlook from

Compaq

(CPQ)

and you've got the recipe for crumbling stock prices. The PC maker warned that the first half of 2001 would be a rough time for growth, pretty much saying what most industry watchers expect -- a difficult first two quarters. In an interview with German magazine

Der Spiegel

, Michael Capellas, Compaq's CEO, said that first-quarter sales growth would be nonexistent, picking up in later quarters. During 2000, Compaq had a 10% growth rate.

And so, Compaq dropped 2.2%, but the damage was isolated. Other large-cap tech companies ended stronger.

Cisco

(CSCO) - Get Report

and

Sun Microsystems

(SUNW) - Get Report

each dropped to new 52-week lows as tech continued to feel the heat. But, the pressure abated and both pulled out of the nosedive. Cisco, scraping $27.81 earlier, closed up 5.8% to $29.56. Sun, hitting a low of $23.56, finished up 3.6% to $25.50.

Chipmakers also firmed up, with

Xilinx

(XLNX) - Get Report

Altera

(ALTR) - Get Report

and

Intel

(INTC) - Get Report

all gaining more-than 3%.

Market Internals and Most Active Stocks

Winners beat losers! Winners beat losers! The Giants win the pennant! The Giants win the pennant!

Like a burning building, Emulex attracted a bunch of attention today (though by the close it had fallen to No. 4 in the most-actives list). Must've been all that smoke and screaming coming from its stock price. Emulex got creamed on a warning about the third-quarter, dropping 48.3%.

Sector Watch

Schlumberger's

(SLB) - Get Report

planned $5.2 billion purchase of

Sema

, a French-British information technology firm, has really done a job on the

Philadelphia Stock Exchange Oil Service Index

. The OSX, as the index is known, was off 2.8%, due primarily to Schlumberger's weakness. The oil services giant fell 11.8%% after announcing that the Sema purchase would impact earnings.

Financials were broadly higher, with insurers taking home most of the goodwill, with banks and brokerages splitting the rest of the love. The

S&P Insurance Index

gained 2.6%, while the

Philadelphia Stock Exchange/KBW Bank Index

and

American Stock Exchange Securities Broker/Dealer Index

were up about 1.5% and 1 .7%, respectively.

HMOs continued to be red hot, as were other medical-related stocks. The

Morgan Stanley/American Stock Exchange HMO Index

gained 6.2%, a 52-week high, while the

American Stock Exchange Pharmaceutical Index

and

S&P Health Care Index

also tracked higher.

Bonds/Economy

Treasury prices closed down, with the long bond dipping most. As is often the case, bonds moved inversely to equities today. Meanwhile, traders are awaiting

Federal Reserve chairman

Alan Greenspan's address before the

Senate Banking Committee

tomorrow. They hope that the central bank chief will reiterate the need for more interest rate cuts to boost the economy.

The benchmark 10-year

Treasury note closed down 4/32 to 99 19/32, raising its yield to 5.05%.

Cathy Minehan, President of the

Boston Federal Reserve Bank

and a voting member of the Fed's monetary policy committee, said today that the Fed's 100 basis-point lowering of interest rates in January is already producing encouraging results. She predicted that

gross domestic product

(

definition |

chart |

source

) growth this year should be around 2%. Echoing recent statements by Greenspan, Minehan asserted that inflation was "well behaved." This was good news to Fed watchers, since figures released last week showed unit labor costs were on the rise, usually perceived as inflationary.