Late Rally Carries Dow Past 3,000
Blue chip stocks mounted a late, fast-paced rally Monday that took the Dow industrial average back over the 3,000 mark.
The Dow jumped 29.52, or 1%, to close at 3,015.21. Gainers led losers 911 to 704 on the New York Stock Exchange, where volume was moderately active at 172 million shares.
Smaller stocks, however, were hurt by continued weakness in key technology issues. The NASDAQ composite index of smaller stocks lost 1.03 points to 515.68.
Many analysts expected the market to continue to languish after Friday’s interest rate cut by the Federal Reserve. Investors took profits after the move, which had long been anticipated. The Dow fell 22.14 points Friday.
But as Monday’s trading wore on, computerized buy programs, short-covering and support for key stocks such as IBM and GE helped fuel the Dow’s surge. IBM added 3/4 to 103 5/8, and GE rose 1 7/8 to 69 3/4.
“Nobody believed coming in today that the market would rally. But what happened is the market turned around, went over 3,000, and we saw a technical bounce which was followed by short-covering and programs,” said analyst Alan Ackerman at Reich & Co.
Although lower interest rates are encouraging more investors to focus on prospects for an economic revival, analysts caution that investors may remain wary of stocks until the disappointment of third-quarter earnings reports is behind the market--which won’t be until late October.
“I think we’re going to go sideways until we get through the avalanche of earnings,” said Robert Walberg, analyst at MMS International.
Among Monday’s highlights:
* Some industrial stocks returned to favor as investors placed bets on an economic recovery occurring sooner rather than later. Copper giant Phelps Dodge rose 1 7/8 to 72 3/8, Illinois Tool Works added 2 1/4 to 65, Alcoa gained 1 1/4 to 67 3/8, and NACCO Industries rose 1 3/8 to 47 3/8.
* Many battered defense stocks rebounded. Loral gained 1 3/4 to 38 1/4, E-Systems rose 1 1/4 to 34 1/2, Lockheed added 1 1/4 to 41 1/4, and Boeing inched up 3/8 to 49. But Northrop continued to sink, losing 7/8 to 22.
* Tech stocks in general were sharply lower, after their steep drop Friday on Intel’s news that earnings are under pressure again. Intel fell 1 1/2 to 41 1/2 after dropping 6 3/4 on Friday.
Irvine-based personal computer firm AST Research slid 1 7/8 to 26 7/8 after First Boston downgraded the stock to hold from buy, saying the company is at risk if price wars in the PC business intensify.
Other tech losers included Apple, down 1 3/8 to 47 1/4; DEC, off 1 1/2 to 54 1/4; Sun Microsystems, off 3/4 to 29 7/8, and Lotus Development, down 1 to 31 1/4.
* Athletic shoe firm Nike jumped 3 to 51 1/8 after reporting strong first-quarter results. Rival L.A. Gear advanced 1/2 to 12 1/8 as it reshuffled executives. Reebok also was strong, adding 1 3/4 to 32 3/8.
* Sanifill, an oil field waste-treatment firm, tumbled 3 7/8 to 25 1/2 after the company cut its 1991 earnings forecast to $1.05-$1.10 a share, citing depressed oil drilling markets. Another waste-control company, Mid-American Waste, slumped 1 3/8 to 22 1/8 after brokerage Alex. Brown & Sons cut its rating.
* Beazer jumped 2 1/4 to 8 1/4 after Hanson said it would buy the debt-laden construction company.
* United Telecommunications fell 1 1/8 to 23 5/8. The company cited a government report that said the government should seek lower rates for telephone services supplied by its Sprint unit.
* Ventura-based Benton Oil leaped 1 5/8 to 11 5/8. The company said it is one of 90 oil firms invited to submit proposals to develop some of Venezuela’s mature or inactive oil and gas fields.
Overseas, German shares were lower as Frankfurt’s DAX index fell 7.87 points to 1,629.75. In London, the Financial Times-100 index dropped 19.8 points to 2,606.
The Tokyo market was closed for a national holiday.
Credit
Bond prices moved higher Monday in light trading as market analysts analyzed the Federal Reserve’s recent interest rate cuts and speculated about the economy’s direction.
The price of the Treasury’s 30-year bond, which slipped 3/32 point on Friday, gained 1/8 point, or $1.25 per $1,000. Its yield fell to 7.92% from 7.93% late Friday.
Traders described a quiet session after the Fed on Friday lowered the discount rate, the interest it charges on loans to banks, to 5% from 5.50%.
The federal funds rate, the interest on overnight loans between banks, was quoted at 5.625% late Monday, up from 5.25% late Friday. Unlike the discount rate, the Fed doesn’t announce changes in the federal funds rate.
Currency
The dollar closed lower as currency traders, discouraged by the continuing weakness in the economy, soured on the U.S. currency.
Analysts said there were no news developments to influence foreign exchange trading, so investors sold the dollar on expectations that the weakened economy would drag interest rates lower.
Like other currencies, the dollar is supported by higher rates, so the prospect of a weak economy and lower yields is a “sell” sign.
In New York, the dollar lost ground to the German mark, falling to 1.673, compared to 1.683 on Friday, and to 133.55 Japanese yen, compared with 134.15 on Friday.
Commodities
Forecasts for freezing temperatures in the upper Midwest by Thursday gave soybean futures prices a sharp boost, but meteorologists were hardly unanimous in predicting an early frost.
Soybeans for September delivery settled 10 cents higher at $6.02 a bushel, the highest settlement price for a near-term soybean contract since Aug. 5.
September wheat settled 6.25 cents higher at $3.293 a bushel, with deferred contracts up 1.75 to 3.25 cents; September corn ended 1.25 cents higher at $2.518 a bushel, and September oats were 2 cents higher at $1.203 a bushel.
Oil prices rallied modestly on the New York Mercantile Exchange on a report that Iraq may be incapable of exporting as much crude as traders had thought. Light, sweet crude oil for delivery in October settled at $21.82 per barrel, up 14 cents.
Precious metals edged higher on New York’s Commodity Exchange in uneventful training. September gold rose 10 cents to $344.50 an ounce; September silver rose 0.8 cent to $3.998 an ounce.
Market Roundup, D10
