FINANCIAL MARKETS : STOCKS : Dow Leaps 40.25; Key Sectors Boost Market
Stocks shrugged off a disappointing Treasury bond auction to close sharply higher Thursday, boosted by futures-related buying and gains in key sectors.
The Dow Jones industrial average climbed 40.25 points, or 1.4%, to 2,971.15, the highest close since April 18.
Smaller stocks lagged: The NASDAQ composite index rose 1.1%, or 5.30 points, to 497.81. Even so, “This was really pretty powerful action” in the broad market, said Gene Seagle, analyst at Gruntal & Co.
He cited as particularly encouraging the breadth of the rise--1,101 issues rose, 516 fell and 487 issues were flat--and the pickup in New York Stock Exchange volume to 180.21 million shares from Wednesday’s 157.24 million.
But “the key is the transportation average,” said Don Hays, strategist at Wheat First Securities. The Dow transports average, heavy with airline and railroad stocks, jumped 24.33 points, or 2.1%, to 1,202.57.
Hays argued that the average is a good economic indicator as it covers firms that move goods across the country. A rise can therefore be equated with a pickup in business as a whole.
Wall Street’s gains came despite a disappointing response to the last leg of the Treasury’s record $37-billion auction. Traders had hoped investors would snap up the 30-year bonds, but the sale drew fewer buyers than expected.
Still, more investors turned their sights toward hopes for an economic recovery--and away from the interest-rate picture, at least temporarily.
Among the market highlights:
* Among transport stocks, AMR (parent of American Airlines) rose 1 5/8 to 64 3/4, UAL (parent of United Airlines) gained 1 1/8 to 158 1/8 and Conrail jumped 2 1/4 to 52 1/4. Also, Federal Express soared 2 7/8 to 41 5/8.
* A rise in the April book-to-bill ratio, the semiconductor industry’s leading indicator, touched off interest in technology stocks. Motorola rose 2 1/2 to 64 3/4, Intel jumped 3 to 54 1/2, IBM rebounded 2 1/8 to 105 7/8 and Compaq added 1 3/8 to 51.
* Health-care stocks returned to favor in a big way. Pfizer jumped 2 1/8 to 58 1/8, Bristol-Myers added 2 5/8 to 80 3/4, Amgen rose 2 1/2 to 129 1/4 and National Medical Enterprises was up 1/2 to 47 1/4.
* Among industrial stocks, GM leaped 1 3/8 to 38 3/8, Deere rose 1 5/8 to 53 5/8 and 3M gained 2 1/8 to 89 7/8.
* Retail stocks were mixed, as most of the nation’s retailers reported weak April sales. Penney gained 1 1/4 to 54 7/8 and Gap climbed 1 1/2 to 58 1/2, but Limited fell 5/8 to 26 7/8 and Woolworth lost 1/8 to 30 3/8.
* Walt Disney leaped 3 1/2 to 123 1/2. The company unveiled a preliminary plan Wednesday for a $3-billion resort in Anaheim.
* Whittaker rose 1/2 to 16 1/8. It received federal clearance to market diagnostic tests for detecting bacterium that has become associated with peptic ulcers.
* San Diego Gas added 1/8 to 38 3/4, stabilizing after falling sharply Wednesday when its planned merger with SCEcorp was terminated. SCEcorp gained 1/4 to 39 3/4.
In foreign trading, Wall Street’s rise and renewed strength in the futures market helped lift British shares. The Financial Times average of 100 leading shares closed up 18.4 points at 2,541.8, 3.5 points short of its all-time high.
The Frankfurt, Germany, exchange was closed for Ascension.
Tokyo stocks finished the day moderately higher. The Nikkei 225-share average closed 128.71 points higher at 26,438.50.
Mexican stocks continued to rocket, as the Bolsa index shot up 3.3%, or 31,354 points, to a new record of 993,229. Cement, retail and phone stocks led the advance.
Credit
Bond prices edged higher after the completion of the Treasury refunding auction.
Analysts said that while demand was cool to the new 30-year bonds auctioned, the bond market responded better than anticipated to the three-day auction overall, and the results show investors still have a healthy interest in fixed-income securities.
The Treasury’s bellwether 30-year bond already outstanding rose 1/32 point, or 31 cents per $1,000 in face amount, at closing Thursday. Its yield held at 8.22%, the same as late Wednesday.
The new 30-year bonds Thursday were sold at an average yield of 8.21%.
Carol Stone, senior economist for Nomura Securities International, said the auction was marked by the lowest amount of bids in more than two years. Under normal circumstances, the bond market would have sold off substantially on such news, she said.
But traders have been pleased with the bidding for 10-year and three-year notes, particularly from foreigners, at a time when the economy is in an uncertain phase.
The federal funds rate, the interest on overnight loans between banks, held at 5.69%, unchanged from late Wednesday.
Currency
The dollar ended mixed in extremely quiet domestic dealings.
The dollar got an initial boost from a better-than-expected Labor Department report showing initial claims for unemployment insurance fell 9% in the week ended April 27. That could be interpreted as an indication the economic recovery might be under way.
But the dollar reversed course on technical factors. Michael Malpede, a senior analyst at Refco Group in Chicago, said many traders were squaring their positions ahead of today’s report on April producer prices, which is expected to shed some light on inflation.
Some analysts said the dollar was curtailed by a poor reception to the final leg of the government’s quarterly refunding auction. The Treasury’s sale of $11.75 billion in 30-year bonds, the proceeds of which will finance the federal deficit, went off worse than expected.
Marc Chandler, an analyst with the financial advisory firm IDEA, said bidding was inefficient and demand was “somewhat reluctant.” Many market observers had anticipated strong foreign appetite for the bonds, which would have boosted the dollar since investors need dollars to purchase U.S. securities.
Overall, “the dollar remained confined to ranges as the market awaits fresh trading incentives,” Chandler said.
The dollar bought 1.732 German marks late in New York, versus 1.731 late Wednesday. It closed at 138.10 Japanese yen, down from 138.30 Wednesday.
The British pound closed at $1.7175, down from $1.7200 on Wednesday.
Other late dollar rates in New York, compared to Wednesday’s late rates, included: 1.4629 Swiss francs, down from 1.4630; 5.8585 French francs, unchanged; 1,280.25 Italian lire, down from 1,281.25, and 1.1526 Canadian dollars, up from 1.1525.
Commodities
A stronger cash market supported hog futures, although pork bellies fell by their permitted daily limit at the Chicago Mercantile Exchange.
On other markets, grains, soybeans, crude oil, gasoline and precious metals were all higher.
Crude oil prices moved to their highest level on the New York Mercantile Exchange since the Persian Gulf War. The gains were trimmed in later trading. Light, sweet crude oil settled to 15 cents higher, with June at $21.93 a barrel.
Precious metals futures were higher at the Commodity Exchange in New York. Gold was 80 cents higher, with June at $359.30 an ounce; silver was 0.3 cent higher, with May at $4.05 an ounce.
Market Roundup, D6
