STOCKS : Small Company Issues Shine; Dow Gains 2.72
Blue chip stocks eked out a small gain Wednesday, but smaller stocks neared record highs as investors looked for bargains before the end of the quarter.
The Dow Jones average of 30 industrials, up 49.01 on Tuesday, added 2.72 to 2,917.57.
But the NASDAQ composite index of smaller stocks jumped 3.80 to 482.37, nearing the all-time high for the index--485.73--reached Oct. 9, 1989.
On the New York Stock Exchange, advancing issues topped declines 879 to 708 as volume rose to 201.83 million shares from 198.72 million Tuesday.
Tuesday’s surge came after a private survey showed that consumer confidence in March took its biggest leap in more than 20 years. The survey rekindled hopes that the economy would rebound soon. But follow-though buying Wednesday wasn’t strong enough to fuel another powerful advance.
Peter Davies, vice president at Nomura Securities, said investors may have become nervous about earnings at blue chip companies after IBM said last week that its earnings this quarter will be well below expectations.
On Wednesday, Cap Cities/ABC dropped 12 1/4 to 466 after warning that its first-quarter results, too, would be disappointing, partly because of Gulf War costs.
Smaller stocks, in contrast, “are seen as niche players in specific areas of the economy that may not be as impacted by the slowdown,” Davies said.
Among the market highlights:
* Technology stocks generally were strong, driven by hopes for continued healthy earnings growth as the economy turns. Lotus rose 1 1/4 to 26 3/4, Sun Microsystems gained 1 7/8 to 32 1/4, Computer Sciences jumped 1 7/8 to 62 3/4 and Compaq was up 1 5/8 to 64. But IBM fell 1 to 112 7/8.
Among smaller Southland tech issues, Carpinteria-based voicemail equipment company Digital Sound leaped 19/32 to 1-19/32, a 59% rise on heavy volume. Some investors apparently see the firm’s depressed sales turning soon.
* Many financial stocks continued to advance, led by insurer Broad Inc., up 1 5/8 to 11 1/8. Imperial Bancorp gained 1 to 13, and City National was up 1/2 to 14 1/2.
* Among smaller Southland stocks, gainers included Standard Brands Paint, up 1 3/4 to 8 3/8; K Swiss, up 3/4 to 24 3/4, and DH Technology, up 5/8 to 11 7/8.
Frederick’s of Hollywood rocketed 4 1/8 to 24 7/8. The lingerie company declared a 3-for-2 stock split and also appears to be drawing interest from investors who play “momentum” stocks, or stocks that have already jumped sharply. Frederick’s began the year at 11.
Elsewhere, Irvine-based Birtcher Medical soared 1 3/8 to 14 1/2 after agreeing to merge with Cabot Medical in a deal that will exchange 0.75 Cabot shares for each Birtcher share. Cabot fell 5/8 to 16 5/8.
* Atlantic Richfield lost 4 1/8 to 128 1/4. Paine Webber downgraded the stock to unattractive from buy after Arco forecast first-quarter earnings below 1990 levels. Another Southland oil stock, Benton Oil & Gas, tumbled 1 1/2 to 10 1/4 after trading as low as 8 on heavy volume. The stock has a volatile history and has lately been caught in a tug-of-war between bullish investors and bearish short sellers.
Inspiration from Wall Street’s gains Tuesday boosted German and British stock prices. In London, the Financial Times 100-share average closed up 27 at 2,464.6. Germany’s DAX average climbed 10.36 to 1,508.80.
But Tokyo stocks eased. The Nikkei 225-share average slipped 234.73 to close at 26,104.65.
Credit
Strong demand at an auction for five-year Treasury notes lifted the entire government securities market, analysts said.
The Treasury’s bellwether 30-year bond rose 9/16 point at closing. Its yield fell to 8.25% from 8.30% late Tuesday.
Bond analysts said they were impressed by individual investors’ appetite for the five-year notes. “It was one of the strongest ones for the five-year issue we’ve seen since August, 1988,” said Dan Seto, economist for Nikko Securities.
The average yield on the notes was 7.81%, up from 7.51% at the last auction on Feb. 21.
The federal funds rate, the interest on overnight loans between banks, held at Tuesday’s 6% rate.
Currency
The dollar rocketed to its highest level in a year against the German mark as renewed optimism about a quick rebound for the U.S. economy lured investors to the currency.
Concerted selling by central banks in Japan, Germany and other countries had little effect.
The dollar, which has risen 20% in value since the end of the Gulf War, broke 1.700 German marks in early New York trading, a key psychological barrier not cleared since last March. By day’s end, the dollar settled at 1.707 marks, up from Tuesday’s 1.687.
Against the Japanese yen, the dollar ended at 139.56, compared to 138.80 at Tuesday’s close.
The dollar’s rise was exaggerated by thin trading, traders said. “This is a holiday week and also the end of the quarter and the big traders are staying out,” one said.
Commodities
Wind storms in Kansas sowed fears of crop damage among grain traders and sent wheat prices up at Chicago’s Board of Trade.
Although the winter wheat damage from the wind and dust storms might prove to be minimal, the market wasn’t taking any chances, said Don Roose, an analyst with U.S. Commodities Inc.
Wheat settled 4 to 5 cents higher, with the contract for delivery in May at $2.847 a bushel.
On the Commodity Exchange in New York, gold settled $1.30 to $2.10 lower, with April at $356.30 an ounce; silver was 7.2 to 8.4 cents lower, with May at $3.84.
Light crude oil settled 3 cents higher to 35 cents lower, with May’s contract at $19.41 a barrel.
Market Roundup, D6
