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Published on 03/08/1999 All articles from this issue

Tech stocks are not helping the Dow reach 10,000

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By Clyde Noel

Special to the Town Crier

Last week's stunning two-day rally made investors count their paper money when the Dow Jones Industrial average increased 460.2 points.

It soared to a record high after the unemployment report showed a near-perfect combination of economic growth and barely detectable inflation.

Wall Street interpreted that as evidence the Federal Reserve would not raise interest rates.

After weeks of up-and-down rallies and retreats, only the best known technology stocks have taken part in the rising stock prices. The Town Crier Stock Index is made up of small cap stocks from Silicon Valley, and these issues have not kept up with the idea of momentum investing - buying the stock of the day.

During the past week, several Town Crier Stock issues came to investors attention because of bold moves. How those stock issues behaved after the announcement is interesting.

Hewlett-Packard announced it will split into two entities in an attempt to improve its financial picture. The two new companies intend to be more focused and more agile to compete in the fast-changing economy. For the week, the stock increased 1 5/8 points, but is down slightly for the year.

Cisco Systems announced it wishes to expand into a South Bay campus and move there for better corporate concentration. The stock increased three points, and for the year is up close to 13 percent.

Intel Corp. is confronting charges it has abused its microprocessor monopoly and the federal government is ready to prove it The trial starts this week and is expected to last three months. For the past several weeks, the stock has been flat and for the year is up only two points at 120 7/8.

3Com stock took a pounding last week when it decreased seven points to 24 5/8. In the wake of a disappointing earnings forecast, analysts are expressing doubts the networking company's strategy and long-term prospects can remain focused. The price of some of its key products, like modems are becoming less expensive commodities and has prompted a reduced earnings forecast.

These leaders in the technology group raise the question whether its a sure way to double your money by investing in technology issues.

If the Dow is able to hurdle the magical 10,000 mark, it would do so because it includes consumer and financial stocks while being light in technology issues. Critics have blasted the Dow for having only two pure tech stocks IBM and Hewlett-Packard included. That can be a blessing for the Dow in the short term, but it doesn't take into effect the leadership role Silicon Valley contributes to the world.