Upbeat Data Lifts Dow 14.98 to Record 3,290.25 : Market Overview
Highlights of Tuesday’s market activity, compiled from Times staff and wire reports:
* The Dow Jones industrial average hit another record high as prices were boosted by upbeat economic reports and encouraging comments from Federal Reserve Chairman Alan Greenspan. The Dow ended with a gain of 14.98 points at 3,290.25.
* What was good for stocks again proved bad for bonds, as interest rates inched higher on worries that rising credit demand and higher inflation will accompany an economic recovery. Meanwhile, the dollar moved sharply higher.
Stocks
Though the Dow hit a record, it wasn’t joined by most other major stock indexes. The Standard & Poor’s 500 index, for example, added 0.40 point to 412.85, but it still is well off its all-time high of 420.77 set earlier this year.
And some investors called Tuesday’s gains suspect, because advancing issues outnumbered declining ones by only 6 to 5 on the New York Stock Exchange.
Volume also was relatively subdued: NYSE trading rose to 204.65 million shares from 180.67 million Monday.
The market’s gains were spurred by the Commerce Department’s report that the index of leading economic indicators jumped 0.9% in January. It was the first gain in three months in the government’s chief forecasting gauge, and suggested that the nation would escape renewed recession this year.
The government also reported that sales of new homes climbed 12.9% in January, the largest gain in a year.
Meanwhile, Fed Chairman Greenspan added to the bullish mood on the economy. In testimony before the Congressional Joint Economic Committee, Greenspan cited “a few hopeful signs” that the economy was beginning to recover. But he stressed that these early indications were “quite tentative.”
For investors, the attraction in stocks now is the hope of improved corporate earnings if the economy continues to rebound. However, analysts caution that if interest rates keep rising, the market is increasingly vulnerable to a short-term pullback.
Among the market highlights:
* The Dow was again led higher by heavy-industry firms that should be buoyed by a strengthening economy. Allied Signal added 1 1/2 to 51 1/2, Alcoa jumped 3 to 73 3/4 and United Technologies was up 1 3/4 to 53 3/8.
* Among other industrial winners, Cincinnati Milacron gained 1 1/8 to 16 5/8, farm machinery maker Varity rose 1 1/4 to 13 3/8, Kaiser Aluminum added 1 1/4 to 13 3/8 and PPG Industries rose 1 to 59.
* Though health care stocks generally lagged again, investors continued to show a huge appetite for new ideas. The initial stock offering of Heart Technology was a smashing success: The stock was issued at 18 a share and rocketed to close at 25 3/4 on the NASDAQ market. The Bellevue, Wash.-based firm makes devices for treatment of atherosclerosis.
* Among growth stocks, Nutmeg Industries jumped 3 3/8 to 24 1/4 after the sportswear maker reported strong fourth-quarter earnings. But old favorite Student Loan Marketing fell 2 3/4 to 63 1/4. A Senate proposal could reduce the need for the company, now a major player in federal student loan programs.
* ITT rose 3 3/8 to 69 7/8 after announcing the sale of its stake in Alcatel Telecommunications Equipment for $3.6 billion.
Overseas, interest from foreign investors helped boost Frankfurt’s 30-share DAX average 15.44 points to 1,763.31, its highest finish since 1,770.30 on Aug. 7, 1990. In London, the Financial Times 100-share average added 11.1 points to 2,565.4.
Tokyo stocks fell. The Nikkei average slipped 436.11 points to 21,051.72.
Credit
The strong housing report sent bond yields soaring, but the market later recovered.
The price of the Treasury’s key 30-year bond, which fell 1 7/32 point Monday, ended down 1/4 point, or about $2.50 per $1,000 in face amount. Its yield closed at 7.92%, up from 7.90% Monday.
William Gross, managing director for Pacific Investment Management Co., said the housing report “set the bond market on its ear” because the growth was much greater than expected.
On its face, traders interpreted the report as a sign that the Fed won’t cut interest rates further to encourage economic growth.
But Gross and other economists were encouraged that the bond market rebounded late in the day as buyers returned. It was helped by technical factors, such as lack of new bond auctions in the next few weeks, and a strong dollar.
The federal funds rate, the interest on overnight loans between banks, was 3.75%, down from 4.388% Monday.
Currency
The dollar rocketed on world currency markets following release of the upbeat U.S. economic data. Although the dollar rose on the data, traders said the currency’s advance was held in check by uncertainty over whether the recovery can be sustained.
The dollar soared to 131.03 Japanese yen in New York from 129.65 Monday. It also climbed to 1.659 German marks from 1.643.
Commodities
Wheat futures tumbled 9.5 cents to a two-month low of $3.95 a bushel on the March contract, after the former Soviet republics made grain purchases that are likely to keep them out of the market until April. Forecasts for beneficial rain this week in U.S. winter-wheat growing areas also weighed on prices.
Meanwhile, oil advanced on the New York Merc after an Algerian official indicated that OPEC members might meet before their scheduled April 24 session if crude prices remain low. Light sweet crude oil for April delivery rose 30 cents to $18.64 a barrel.
On New York’s Comex, March gold dropped $1.10 to $351.40 an ounce, and silver slipped 1.3 cents to $4.10.
Market Roundup, D8
