By LISA SINGHANIA
NEW YORK – Optimism that interest rates might soon be lowered sent blue chip stocks soaring today, while earnings worries again dogged the tech sector.
Financial stocks surged on speculation that the Federal Reserve would cut rates more quickly than expected. But tech stocks fell, unable to overcome Wall Street’s doubts about their profitability in the slowing economy.
“Tech stocks don’t seem to have found a bottom yet,” said Steven Goldman, market strategist at Weeden &Co. “We’re in the midst of what could be a reversal of these high interest rates, and they’re still not ready to stabilize. The market thinks at least some of them are still overvalued.”
The Dow Jones industrial average closed up 210.46 to 10,645.42, according to preliminary calculations, as did the Standard &Poor’s 500 index, rising 10.59 to 1,322.74.
But the rally didn’t extend to the Nasdaq composite index, which fell 28.74 to 2,624.53 despite advancing in early trading.
Blue chips’ strength today appeared predicated on hopes the Fed would act more aggressively than expected at its regular meeting Tuesday, urged on by recent economic data showing growth is slowing.
“There’s growing optimism that the Fed will act sooner rather than later to cut rates,” said Alan Skrainka, chief market strategist at Edward Jones of St. Louis. “If they don’t cut rates Tuesday, they’ll send a very strong message that rate cuts are coming.”
Although few actually expect a rate cut this week, Skrainka said many people expect the Fed “is going to be pretty unambiguous in saying the risk has shifted from inflation to recession.”
Financial institutions, which would benefit from an interest rate cut, moved higher. Shares of banker J.P. Morgan rose $6.63 to $166.63, as did American Express, up $2.13 at $56.75.
Technology stocks fell, though, on continued investor fears the sector’s performance would not justify high stock prices. Chip maker Intel rose 81 cents to $33.25 but Microsoft slipped $1.38 to $47.81 and Cisco Systems fell $5.23 to $42.94.
“There’s still a lot of concern about slowing personal computer sales and reduced corporate information technology purchases,” Skrainka said.
Last week, investors unloaded technology and blue chip shares on fears that the slower growth would translate into disappointing earnings, which would drive stock prices down further. The selling intensified late in the week on an earnings warning from Microsoft.
Corporate profits’ worries remained evident.
Time Warner fell $9.47, or 13 percent, to $63.25 after the media giant reduced its 2000 annual outlook, citing soft demand for cable advertising and disappointing results from the Adam Sandler movie “Little Nicky.”
Amazon.com fell $3 to $19.88, after dipping to $18.94, a 52-week low, on continued worries about online retailers’ performance in a moderating economy.
Also today, Wall Street rewarded companies which announced restructurings to increase profitability.
Insurer Aetna shot up $3.81, nearly 12 percent, to $36.81 after saying it would cut 5,000 jobs, or about 12.5 percent of its work force. Gillette rose $1 to $34.81 after the personal care products maker announced it was cutting 2,700 jobs, or about 8 percent of its work force.
Advancing issues outnumbered decliners 5 to 3 on the New York Stock Exchange, where volume came to 908.04 million shares, well behind the nearly 1.2 billion at the same point Friday.
Trading was unusually heavy Friday because of the expiration of option contracts and futures contracts, in what is known as “triple-witching.”
The Russell 2000 index was up 5.22 at 463.25.
Overseas, Japan’s Nikkei stock average slipped nearly 0.5 percent. Germany’s DAX index rose 0.93 percent, Britain’s FT-SE 100 was up 1.1 percent, and France’s CAC-40 gained 0.8 percent.
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