Stocks Rally on Expectations of Rebound in Semiconductor Sales

Strategic Insights -

The Nasdaq composite index reached its first record since April 22, fueled by expectations that semiconductor sales will rebound, with Intel Corp. leading the charge. The Standard & Poor's 500 index also set a new record, boosted by gains in Travelers Group Inc. and Citicorp, which will soon merge to form the world's largest financial company. Analysts are optimistic about the combined company's potential, citing ample opportunities for earnings growth and cost-cutting. The Dow Jones industrial average also rose, with Intel benefiting from a "strong buy" rating from Morgan Stanley Dean Witter & Co. analyst Mark Edelstone.

Key Takeaways:

  • The Nasdaq composite index set a new record, rising 1.4 percent to 1935.39, led by Intel Corp.
  • The Standard & Poor's 500 index also reached a record, with Travelers Group Inc. and Citicorp leading the gains.
  • The combined Travelers-Citicorp will have opportunities to increase earnings and cut costs, potentially boosting profits by 20 percent in 1999, according to Merrill Lynch & Co. analyst Judah Kraushaar.
  • Investors remain skeptical about the merged company's ability to operate efficiently due to its large customer base.
  • Internet stocks experienced a rollercoaster ride, initially declining after a Wall Street Journal story questioned their valuations but rebounding after Yahoo! Inc. reported quarterly earnings beating analyst forecasts.
  • Yahoo! Inc. announced a 2-for-1 stock split and reported quarterly earnings of 15 cents a diluted share, exceeding analyst expectations.
  • The decline in Internet stocks freed up capital for other computer-related stocks, such as Intel, Microsoft Corp., and Dell Computer Corp.

Statistics:

  • The Nasdaq composite index rose 27.28, or 1.4 percent, to 1935.39. (Source: Original Text)
  • The Standard & Poor's 500 index gained 11.71, or 1 percent, to 1166.37, led by Travelers Group Inc. and Citicorp. (Source: Original Text)
  • The Dow Jones industrial average rose 89.93, or 1 percent, to 9174.97. (Source: Original Text)
  • Intel Corp. gained 3 3/16 to 78 5/16. (Source: Original Text)
  • Yahoo! Inc.'s quarterly earnings were 15 cents a diluted share, exceeding analyst forecasts by 6 cents. (Source: Original Text)

Sources:

  • The Wall Street Journal ( questioning valuations of Internet companies)
  • Morgan Stanley Dean Witter & Co. (Mark Edelstone's "strong buy" rating on Intel Corp.)
  • Loomis Sayles & Co. (Phil Schettewi's comments on investor sentiment)
  • Merrill Lynch & Co. (Judah Kraushaar's estimate of 20 percent profit growth for Travelers-Citicorp)
  • Yahoo! Inc. (quarterly earnings and 2-for-1 stock split announcement)