Dow Shrugs Off Warnings So Far

Sat., March 7, 1998

Associated Press

Stocks bounced back Friday, setting new highs, as a strong economic report soothed worries about this week’s profit warnings by Intel and Motorola - just in time for yet another warning from a major technology company.

The Dow Jones industrial average posted its biggest gain in a month, rising 125.06 to 8,569.39, about 15 points off Tuesday’s record close of 8,584.83. That wiped out Thursday’s 95-point slide and left the Dow with a gain of 23.67 for the week.

Broader stock indexes also repaired most of Thursday’s damage: The Standard & Poor’s 500 and the New York Stock Exchange composite resumed their record-setting march after a two-session slump, and the technology-heavy Nasdaq composite recovered most of Thursday’s 2.7 percent plunge.

The rebound came despite Thursday’s discouraging forecast from Motorola, the second profit warning in as many days from a blue-chip technology name. Late Wednesday, Intel announced that first-quarter sales of its semiconductors have been weak, prompting concerns about demand for personal computers and, perhaps, in the overall economy.

Thanks to the continued economic growth suggested by Friday morning’s robust reading on February employment, investors managed to shrug off the dire pronouncements from Intel and Motorola after just one day.

But on Monday, the mood may sour just as quickly when most people get their first chance to react to a profit warning late Friday from Compaq Computer, the leading producer of personal computers.

“It’s rather amazing that there’s been such immunity to adverse news. Clearly, these are high-profile companies that are reporting problems in basic parts of their business,” said Ned Riley, chief investment officer at BankBoston, noting that some investment firms lowered their profit forecasts for Disney early in the week.

The Labor Department reported Friday that the economy created a surprising 310,000 jobs in February, pushing the nation’s unemployment rate to a 24-year low of 4.6 percent.

Bonds stumbled after the report - which poses an inflationary risk if the strong job market forces employers to pay higher wages. But bonds soon rebounded to push interest rates lower and provide additional support for stocks.

Advancing issues outnumbered decliners by a nearly 3-to-1 margin on the NYSE, where volume totaled a 665.50 million shares, up from Thursday’s 651.93 million.

The Nasdaq composite index, which tumbled nearly 48 points on Thursday, rose 41.57, or 2.4 percent, to 1,753.49.

Thursday’s big Nasdaq decliners led the rebound on that market: Intel, which plunged nearly 11 points on Thursday, rose 2-1/2 to 78-1/8 as the most active issue, followed by Dell Computer, which rose 6-5/8 to 138-1/2, recovering most of Thursday’s 7-point slide. In late trading on other markets, however, Dell surrendered that entire rebound after the announcement by PC rival Compaq.

Overseas, Tokyo’s Nikkei stock average rose 1.7 percent, Frankfurt’s DAX index rose 2 percent, and London’s FT-SE 100 rose 1.5 percent.

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