Big Tech Shares Rise, but Most Stocks Slide

U.S. stocks ended mostly lower Monday, as leading technology stocks rebounded from last week’s sell-off, but Internet shares continued to fall amid jitters about their sky-high valuations.

Meanwhile, Treasury bond yields, which surged last week amid fresh signs of robust economic growth, ended mostly unchanged, awaiting the Treasury’s auction of $35 billion in new notes and bonds starting today.

On Wall Street, the Dow Jones industrial average closed off 13.13 points at 9,291.11.

The Nasdaq composite index rebounded 31.30 points, or 1.3%, to 2,404.92, coming back a bit from its loss of more than 5% last week.

In the broader market, declining issues outpaced advances by 16 to 14 on the New York Stock Exchange and by 22 to 19 on Nasdaq.

A variety of factors pressured stocks Monday, including growing concern about the recent rise in long-term bond yields.

Some on Wall Street have speculated that recent data showing continued strength in the economy--despite turmoil abroad--could push the Federal Reserve toward a bias favoring an increase in short-term interest rates, to slow the economy and stave off any inflationary pressures.

“In my opinion, one of the most important concerns [for stocks] is the possibility that rates may rise,” said Peter Canelo, equity strategist at Morgan Stanley Dean Witter. “This economy is not slowing.”

Canelo said a move to higher rates or a burst in the Internet stock bubble could deflate the Dow to 8,700 or 8,800 in the next month--a decline of about 6% from Monday’s close.

His comments warning of a possible market downturn came on the same day that Ralph Acampora, an influential analyst at Prudential Securities, said in a report that U.S. stocks could decline 5% to 10% in the near term.

In his report, Acampora said technology stocks in particular were still under pressure.

“Even after last week’s drubbing, many of these issues are still too spiky and could drop another 10% from current levels,” he said.

Yet blue-chip technology names were mostly immune to the market warnings Monday, in part because of some favorable news about deals and developments at these companies, analysts said.

“The market for technology stocks was beaten up late last week, and I think we saw some bargain-hunting investors [Monday] kicking in the tires and getting back in,” said Peter Coolidge, senior equity trader at Brean Murray & Co.

Microsoft jumped $5.25 to $165.25 on news of a corporate reorganization. Intel rose $4.44 to $132 and IBM added $1.25 to $167.

Also, Applied Materials leaped $6.75 to $67.44 after two analysts upgraded the maker of semiconductor manufacturing equipment. Also gaining on upgrades were rivals KLA Tencor, up $4.19 to $58.06, and Cymer, up $2.88 to $28.

But there was scant bargain-hunting in the Internet sector, particularly amid growing talk on Wall Street about the sky-high valuations for these companies.

Yahoo fell $14.13 to $158.63, Lycos slid $9.75 to $127.25, America Online dropped $5 to $159 and Infospace.com lost $6.88 to $54.13.

In the bond market, yields finished mostly flat. The 30-year Treasury bond closed at 5.35%, the same as Friday, which was the highest since early November.

The yield had jumped more than a quarter point last week as government data pointed to continuing economic strength.

Bond investors also have been jittery ahead of the government’s auctions of five-year notes today, 10-year notes Wednesday and 30-year bonds Thursday.

“It’s cautious” before the debt sales, said Sal Greco, a strategist at Metropolitan Life Insurance.

Wall Street firms that bid on securities at auction and then sell them to investors typically drive up yields before a sale to drum up demand.

In currency trading, the dollar rose more than 1 yen after the benchmark Japanese 10-year government bond yield tumbled to 2.16%, retreating from an 18-month peak of 2.44% last week.

Chief Cabinet Secretary Hiromu Nonaka said it was “urgent” for the Bank of Japan to consider buying government bonds in the secondary market, after a tripling in the benchmark bond yield since October.

That followed Finance Minister Kiichi Miyazawa’s suggestion Friday that the bank buy bonds and sell short-term bills.

Given the two officials’ comments, “the direction BOJ will go has been made clear,” said Naomi Hasegawa, a senior economist at Tokyo-Mitsubishi Securities. “That’s a plus for bonds.”

Among U.S. market highlights:

* Gold mining firm Barrick Gold eased 6 cents to $20.19. Late in the day the company said its chief executive resigned unexpectedly.

* Industrial stocks were mixed after rallying last week on economic optimism. Alcoa eased $1 to $88.50 and International Paper lost $1.50 to $43.19, but Caterpillar rose $1 to $47.25.

*

Internet stock focus, C6

*

Market Roundup, C13