Nasdaq Closes at High as Dow Edges Lower

Bellwether technology shares drove the Nasdaq market to its first new high in four months Monday, but with most stock measures already trading at record levels, the broad market posted a mixed performance.

The Dow Jones industrial average slipped 3.74 points to 8,410.20 despite a big gain from Merck, which soared $5.94 to $130.63. Oil-related shares slid sharply as the tentative U.N. truce with Iraq sent oil prices falling from already depressed levels.

Broader stock measures rose modestly, but enough for the Standard & Poor’s 500 index to set a record high for the 10th time in 15 sessions.

The Nasdaq composite index, dominated by a technology group that suffered the heaviest damage in late October’s sell-off, posted the biggest gain on Monday to catch up with Wall Street’s recovery. Nasdaq jumped 23.63 points, or 1.4%, to a record 1751.76.

The Nasdaq joined the Dow industrials and S&P; 500 in topping records set before Asia’s financial crisis triggered the Oct. 27 plunge in the stock market. The Nasdaq is up 12% year to date, trouncing the S&P; 500’s 7%.

“The bears were wrong; the bears had jumped to the conclusion that somehow Asia was going to bring the technology sector to its knees,” said Joseph McAlinden, chief investment officer at Dean Witter InterCapital Inc. Instead, many companies will be helped because they can buy components more cheaply in Asia, he said.

Still, McAlinden prefers basic industrial stocks such as metals and heavy capital equipment companies. They are out of favor now but will do well in the next six months as it becomes clear the economy is stronger than it appears now, he said.

Meanwhile, U.S. bond yields rose as investors fretted that Federal Reserve Board Chairman Alan Greenspan, who testifies to Congress today, may suggest that Asia’s slowdown won’t have a big impact on the U.S. economy.

“I wouldn’t take any big bets on Treasuries before” Greenspan’s remarks, said Jack Ablin, who oversees $7 billion in bonds at Barnett Capital Advisors in Jacksonville, Fla. The Fed chairman may indicate “the Asian situation is not going to pare our economy as much as he originally thought,” Ablin said.

The price of the benchmark 30-year Treasury bond fell, driving its yield up to 5.90%, the highest in almost two weeks. It was at 5.87% on Friday.

Stocks drew only a temporary boost from news that U.N. Secretary-General Kofi Annan may have averted a U.S.-led military strike on Iraq by securing an agreement from Saddam Hussein to give weapons inspectors unlimited access to his presidential palaces.

“When dealing with Saddam Hussein, there’s always a degree of uncertainty and very few Wall Streeters understand the complete nature of the tentative agreement,” said Alan Ackerman, market analyst at Fahnestock & Co.

Advancing issues outnumbered decliners 10 to 9 on the New York Stock Exchange, where volume totaled 559.40 million shares, down from last week’s pace.

The S&P; 500 rose 3.93 points to 1,038.14, and the NYSE composite index rose 0.92 to 538.41, also closing at a record high for the second day in a row.

The Russell 2,000 index of smaller companies rose 2.30 points to 456.29.

Despite the small decline in the Dow and the marginal buying outside the technology group, analysts remained encouraged by the market’s resilience.

“It’s as simple as the market digesting the phenomenal gains it’s had from January to present. The market’s doing a great job, they can barely sell it off,” said Ralph Bloch, chief market analyst at Raymond James & Associates of St. Petersburg, Fla., calling the Nasdaq record a key development.

Among Monday’s highlights:

* Nasdaq was buoyed by its bellwethers. Microsoft surged $4 to $81.63 on its first day of trading after a 2-for-1 stock split, while Dell Computer rose $4.63 to $130.94 and Intel rose $2.38 to $94.19.

* The potential impact of Iraq selling its oil in an oversaturated market hit big oil producers. Chevron fell $2.19 to $77 and Exxon fell $1.81 to $62.50 as two of the Dow’s weakest components.

Likewise, oil-field service stocks plummeted. Schlumberger dropped $2.44 to $72.06. Smith International fell $2.38 to $48.88.

But transportation stocks rose on expectations that jet-fuel prices will follow crude oil lower. UAL jumped $3.75 to $89, Alaska Air Group gained $3.63 to $55.88 and AMR rose $2.75 to $126.63.

* Among individual issues, Magna Group soared $10.56 to $57.50 after Union Planters, Tennessee’s largest bank holding company, said it will acquire Magna for $2.3 billion in stock to expand its reach in the St. Louis area. Union Planters fell $2.13 to $61.31.

Home Depot rose $1.56 to $68.56 as the home-improvement retailer was expected to report better-than-expected fourth-quarter results today.

Qualcomm rose $4.75 to $51.38 after the maker of wireless-phone equipment said it will be supplying $240 million in wireless phones to AirTouch Cellular.

The specter of Iraqi oil sent crude oil on the New York Mercantile Exchange down 87 cents to $15.37 a barrel, the lowest since early April 1994, on news President Clinton was ready to signal willingness to give a chance to the U.N.-brokered deal with Iraq.

The dollar fell sharply against European currencies on the news out of Iraq. But the dollar fell against the Japanese yen after a weekend meeting of global finance ministers ended without a clear signs that Japan would act to bolster its stumbling economy or defend its faltering currency.

The dollar fell to 1.80 German marks from 1.82 marks late Friday and an overnight high at 1.83 marks. The dollar rose to a one-month high at 129 yen before ending at 127.82 yen, down slightly from Friday’s close at 128 yen.

Overseas, London’s FTSE-100 closed down 0.85%. In Tokyo, the 225-stock Nikkei average fell 0.9%, and Frankfurt’s DAX index rose 1.2%.

Market Roundup, D14