Internet and semiconductor stocks picked up some momentum Tuesday, leading the Nasdaq composite up 23 points to 2,868.24. But a stronger-than-expected jump in August's retail sales figures sent the Dow down 120 points to 10,910.33.
Retail sales jumped 1.2 percent in August, the Commerce Department reported Tuesday, more than the 0.8 percent rise economists had expected. The figure marked the fastest rate increase since a 1.7 percent climb last February and added fuel to speculation the Federal Reserve Board will raise interest rates again.
Surging demand for clothes and automobiles powered the gains, with new car sales up 19 percent from August a year ago.
"Clearly it's not a good sign," said Arthur Hogan, chief market analyst at Jefferies & Co. "It means we have a stronger-than-expected economy.''
The Federal Reserve's policy-setting committee could look at the numbers, as well as the Consumer Price Index due out Wednesday, when it meets Oct. 5 to decide if another interest rate hike is needed to cool the economy. The central bank has raised rates twice this year.
"It's not the message we want to send to the Fed going into the October meeting," Hogan said.
Semiconductor and chip-equipment stocks dazzled Wall Street Tuesday after several analysts put out positive comments on leaders such as Applied Materials Inc. (Nasdaq: AMAT) and Lam Research Corp. (Nasdaq: LRCX). Applied shares closed up 5 9/16 to 81 9/16 while Lam and Novellus Systems Inc. (Nasdaq: NVLS) gained 7 1/2 and 5 13/16 a share, respectively.
Intel Corp. (INTC) moved up 1 7/16 to 85 13/16. Advanced Micro Devices Inc. (AMD) rose 1/2 to 21 3/4 and International Business Machines Corp. (IBM) managed to tack on 1 1/16 to 133 7/16, one of the Dow's few winners.
PurchasePro.com Inc. (PPRO) got off to a good started in its debut, surging 14 1/8 to 26 1/8. PurchasePro.com had priced its 4 million shares at $12 each.
Qualcomm Corp. (QCOM) assuaged investors' fears Tuesday with an announcement they will meet or exceed estimates for the fourth quarter. Its shares rocketed up 17 1/8 to 170 1/2 after falling nearly 8 percent Monday when the company pulled out of an investor conference.
Smart Modular Technologies (SMOD) rallied up 11 1/16 to 35 3/8 on news that Solectron Corp. (SLR) will buy it for $1.8 billion in stock. Solectron, which closed up 1 1/2 to 75 1/4, will benefit from expanding its reach into memory components and embedded computers.
Internet stocks gained ground despite the interest-rate worries.
Priceline.com (PCLN) closed up 4 3/8 to 60 after it trumpeted its sales growth.
Yahoo! Inc. (YHOO) hustled up 4 7/16 to 165 3/16. America Online Inc. (AOL) gained 13/16 to 90 15/16 while Amazon.com Inc. (AMZN) and Excite@Home Corp. (ATHM) closed up 2 11/16 and 1 1/4 a share, respectively. Lycos Inc. (LCOS) was unchanged at 44 1/16 and Infoseek Corp. (SEEK) tacked on 7/8 to 30 7/8.
Best Buy Co. Inc. (BBY) fell 6 1/4 to 54 1/4 though its earnings beat Wall Street's estimates by a penny a share at 28 cents a share.
Among widely held PC stocks, Dell Computer Corp. (DELL) fell 13/16 to 47 1/16; Compaq Computer Corp. (CPQ) shaved off 11/16 to 24 1/8; Gateway Inc. (GTW) dipped 1/4 to 49 3/16 and Apple Computer Inc. (AAPL) closed up 2 13/16 to 77 13/16.
Oracle Corp. (ORCL) fell 5/16 to 45 7/16 ahead of its first-quarter earnings report. Microsoft Corp. (MSFT) picked up 1 1/8 to 95 and Sun Microsystems Inc. (SUNW) dropped 5/16 to end at 85 3/8.
Cisco Systems Inc. (CSCO) rose 1 1/4 to 71 15/16. 3Com Corp. (COMS) lost 3/8 to 28 ? and Lucent Technologies Inc. (LU) added 3/8 to 67 1/8.