Dow Rebounds 32.42 in Quest for Bargains : Market Overview
Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:
* Stocks ended sharply higher in a late rally, reclaiming ground lost a day earlier. The Dow Jones industrials, down 41.59 points in the week’s first two sessions, rose 32.42 points to 3,255.81.
* Bond yields rose on news that December’s housing market was stronger than expected.
Stocks
The stock market has been caught in a tug-of-war between bargain hunters and profit takers for the last week, and the bargain hunters won Wednesday.
Many of the same growth stocks that had been hit hard on Tuesday rebounded sharply Wednesday. But money also continued to seek out industrial and technology issues that could benefit from an economic rebound.
Also, smaller stocks retraced their Tuesday losses, and then some: The NASDAQ composite index shot up 15.81 points, or 2.6%, to 620.68, erasing Tuesday’s 14.51-point drop.
On the New York Stock Exchange, advancing issues beat losers by 9 to 5 as trading volume rose to 228.14 million shares from Tuesday’s 218.80 million.
“The market, from the perspective of growth stocks, had been hugely oversold,” said analyst Philip Orlando of Unity Management. “Some people are putting money back into bargains.”
Wednesday’s rally came amid news that the percentage of bullish investment advisers has reached what some call a dangerously high level of 60%, up sharply from 52.6% last week. The figures are compiled by an East Coast service called Investors Intelligence, which tracks investor newsletters.
In Wall Street’s perverse way of looking at things, when too many people are optimistic about stocks, it’s often a signal that the market is near a peak. “People are too optimistic. Most of the cash has already come in,” warned Michael Burke, editor of Investors Intelligence.
Among the market highlights:
* Growth stocks that rebounded sharply included Home Depot, up 3 7/8 to 65 5/8; U. S. Surgical, up 7 3/4 to 118, and computer networker Cisco Systems, up 5 1/2 to 72 1/2.
* Two new California-based medical stocks debuted and soared on intense demand--a sign that the enthusiasm for health care issues isn’t dead. Gilead Sciences, a biotech firm, went public at 15 and closed at 20 1/4. Ventritex, which makes implantable devices that regulate heartbeats, was sold at 18 and rocketed to 30.
Biotech and drug stocks in general had a good day. Amgen gained 4 3/4 to 71, Cytel rose 2 1/2 to 19 3/4, Gensia added 2 3/8 to 56 7/8, and Pfizer jumped 2 to 75 7/8.
* The Dow was powered by a mix of industrial and consumer stocks, including Boeing, up 2 3/8 to 51 7/8; Goodyear, up 1 5/8 to 57; Coca-Cola, up 1 1/2 to 74 7/8, and Procter & Gamble, up 3 3/8 to 95 7/8.
* Technology stocks bouncing higher included IBM, up 2 3/4 to 95 5/8; Lotus, up 3 7/8 to 32 5/8; Sun Microsystems, up 1 3/4 to 33 1/4; AST Research, which added 1 3/4 to 22 1/4, and Qualcomm, up 1 to 25.
* Among Southland issues, big gainers included Mattel, up 1 7/8 to 33 3/8; insurer Broad, up 1 3/4 to 19 1/8; retailer ClothesTime, up 1 1/8 to 11, and athletic shoe firm K Swiss, up 3 to 17 1/4. Merrill Lynch raised 1992 earnings estimates for K Swiss to a range of $1.35 to $1.50 a share, from $1.25 to $1.35.
Overseas, Tokyo shares rebounded after a four-day slump. The Nikkei average rose 675.82 points, or 3.2%, to 21,534.12.
Stocks closed lower in London. The 100-share Financial Times average fell 21.4 points to 2,522.0. In Frankfurt, shares fell after labor talks in the German steel sector collapsed. The DAX average lost 5.19 points to 1,680.10.
Credit
The bond market was disturbed to see housing starts in December rise 2.6% to 1.103 million, the highest level since the 1.130 million of November, 1990.
The price of the Treasury’s 30-year bond fell 21/32 points, or $6.56 per $1,000. Its yield rose to 7.62% from 7.56% Tuesday.
Bond investors fear that any resumption of economic growth will mean higher interest rates. Still, while Federal Reserve Governor John LaWare told a New York legislative committee on Wednesday that the economy appears to be recovering, he added, “Unfortunately, it’s very slow.”
The federal funds rate, the rate on overnight loans between banks, was at 4.50%, unchanged.
Currency
The dollar settled mixed on world markets in quiet trading.
The finance ministers from leading industrial nations meet Sunday, and many analysts expect the ministers to take action to push the dollar lower against the Japanese yen--which would make U.S. exports cheaper in Japan, and perhaps help cut Japan’s trade surplus.
In New York, the dollar slipped to 123.38 yen from 123.68 Tuesday. But the dollar rose to 1.591 German marks from 1.587.
Commodities
Pork futures gained on the Chicago Merc, with investors trading on rumors that the Administration is close to putting together a food-aid package to the former Soviet republics.
Meanwhile, light, sweet crude oil for March delivery climbed 22 cents to $18.94 a barrel on the New York Mercantile Exchange.
On New York’s Comex, February gold slipped 10 cents to $358.30 an ounce; January silver climbed 1 cent to $4.27.
Market Roundup, D8
