Nasdaq Powers from Correction to Record Books
ANNOUNCER: MONEYLINE continues. Here again, Stuart Varney.</s>VARNEY: This time last week, the Nasdaq was hovering near a correction. Today, it's at a record. The merger to rival all mergers that could change the way you communicate: a look at the impact on Vodafone Airtouch's historical takeover of Mannesmann. And our special Friday feature, "The Bottom Line," General Motors breaking new ground in more ways than one. First, though, more on our top story: a near perfect picture in the job market. This week, America entered its longest economic in history and it certainly shows in today's monthly jobs report. The unemployment rate fell to 4 percent even in January, its lowest level in three decades. Businesses added a whopping 387,000 new jobs to their payrolls, many more than expected. The report helped set up a wave of selling in the bond market, though. The 30-year issue fell more than 1.75 points, the yield moving up to 6.27 percent. However, as Ceci Rogers reports, traders were also feeling the effects of a truly wild week.</s>CECI RODGERS, CNN CORRESPONDENT (voice-over): Fear dominated the pits in Chicago again, as one of the most tumultuous weeks in bond market history drew to a close. Treasuries climbed in price at first, then plunged, down as much as two full points. For the week, the 30-year Treasury gained three full points, its yield dropping by almost a quarter of a percentage point. Rumors continue to fly that Wall Street firms had suffered big losses, as big bets in bonds went bad.</s>MICHAEL BOSS, IRJ LANSTON FUTURES: We've heard reports of 20 million here, 50 million there, one as high as 200 million. Obviously, that hurts.</s>RODGERS: Such talk has dominated the pits since Wednesday's announcement of a bigger than expected drop in the future supply of 30-year Treasuries. Because of that new reality, traders believe long bond yields will continue to be lower than those on shorter-term debt, such as two-year notes. It's known as an inversion of the yield curve.</s>JIM BIANCO, BIANCORESERACH.COM: Most people weren't betting on the yield curve inverting, let alone becoming very inverted. And it's become a quite serious situation because they're sitting on big losses. And they don't want to sell them because they're afraid this might be near the worst of it.</s>RODGERS: That remains to be seen. In the midst of today's sell-off traders report frantic buying of bonds by insurance companies who need long-term Treasuries for their portfolios. (on camera): Treasury Secretary Lawrence Summers downplays the turmoil, but plenty of bond investors are angry about his department's supply announcement, which came on the same day as the Federal Reserve's interest rate hike. Ceci Rodgers, CNN financial news, Chicago.</s>VARNEY: The move away from old economy into new economy stocks continued today. The evidence: a new record for the Nasdaq after its biggest weekly point gain ever. On the other side of the coin, despite big gains for tech favorites like Microsoft and Hewlett- Packard the Dow industrials reversed a 76 point gain. That index closed down nearly 50 at 10963. And volume on the big board topped more than a billion shares. As usual, the Nasdaq went its own way. It was up 33 points at 4244. That's a new high. The volume there was 1.7 billion shares. As we noted, Microsoft and Hewlett-Packard were big Dow winners. So was General Electric, up 2 1/4. And Cisco helped lift Nasdaq. It was up more than 3, another new high there. The Nasdaq's record finish was particularly impressive considering that on Monday the index was in correction territory, down 10 percent from its high. Susan Lisovicz has more on the Nasdaq's remarkable turnaround.</s>SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): Wall Street's best performer has resumed its winning stride. The Nasdaq rallied five for five this week then closed with a dramatic flourish by hitting a new record. The hot index regained its footing after a cold performance in January. At one point, the Nasdaq was down 11.5 percent from its high, a decline frequently categorized as a correction. But volatility has been a hallmark of the Nasdaq this year. Its weekly point gain of 356 points was its best ever, which followed its worst weekly point loss.</s>JOSEPH BATTIPAGLIA, STOCK STRATEGIST, GRUNTAL & CO.: Whenever the Federal Reserve is adjusting interest rates, stocks become jumpy. They do become more volatile. The second is the Nasdaq had an 85 percent gain last year, as we all know, so profit-taking in January, some lost momentum, you're going to see it play out in the Nasdaq. But the fundamental picture is still very powerful. And that's why it bends but doesn't break.</s>LISOVICZ: The Nasdaq's turnaround comes without the participation of some of its five big caps, which account for nearly a third of its value. Microsoft rose three on the final trading session of the week but is down nearly 9 percent on the year. Dell Computer has plunged nearly 25 percent, and MCI Worldcom has edged up less than 1 percent. But Intel has surged 22 percent on the year, and Cisco, which shot up today by more than 3 ahead of its earnings report next week, is up 13 percent on the year. And some analysts say strong earnings will carry the Nasdaq higher still.</s>PHIL DOW, MARKET ANALYST, DAIN RAUSCHER WESSELS: The main reason is that's where most of the innovation is. Most of the better ways of doing business are resulting from business plans on Nasdaq.</s>LISOVICZ (on camera): Most encouraging to analysts is the improving breadth of the market. More stocks are participating in the gains, and that should help buffer the Nasdaq from some of its recent volatility. Susan Lisovicz, CNN financial news, New York.</s>VARNEY: And here's another hot sector today: gold stocks. The price of gold soared as investors fled the uncertainty of the bond market for the relative safe haven of gold. The metal jumped $23 to $310 an ounce, its richest price in more than 10 months. That, of course, lifted gold stocks, including Newmont Mining, Placer-Dome, Barrick Gold and Freeport-McMoran. Coming up, the biggest merger in history creates a wireless behemoth across the Atlantic. We'll tell you what that means on these shores.