Solid Earnings Reports Boost Stocks 4th Day : Market Overview
* The stock market closed higher for the fourth straight day as investors, buoyed by solid earnings reports and low interest rates, again indulged their new-found appetite for shares. The Dow Jones industrial average added 1.89 points to 3,393.78 to finish the week up 108.07 points.
* Treasury bond yields rose after a fresh round of data suggested that the economy may not be as weak as some experts had believed. The Treasury’s 30-year bond yield rose to 7.45% from 7.42% Thursday.
Stocks
Stock prices edged into positive territory in the early afternoon after spending the morning at slightly lower levels. Profit-taking hit near the close.
Still, advancing issues outnumbered declines by about 11 to 9 on the New York Stock Exchange. Big Board volume was 180.58 million shares, down from Thursday’s 193.4 million.
While the Dow remained below its June high of 3,413.21, the Standard & Poor’s 500 index hit another record, rising 0.29 point to 424.21.
A mixed bag of economic data released in the morning elicited little response from the market. The Commerce Department said orders to U.S. factories jumped by a better-than-expected 2.3% in June. But personal income in the month was virtually unchanged.
Meanwhile, the Chicago Purchasing Managers Index rose in July, but the University of Michigan’s consumer sentiment index sagged.
In the early afternoon, however, stocks moved higher as investors focused on the solid corporate earnings reports--evidence that profits are recovering from a three-year slump, said Hugh Johnson, chief investment officer with First Albany Corp.
Among the market highlights:
* Stocks rising on encouraging earnings reports included insurance firm Broad Inc., up 3/8 to 21; chemical firm Morton International, up 2 3/8 to 58 1/8; ASK Computer Systems, up 2 1/4 to 15 1/8; Midwest natural gas distributor MCN Corp., up 1/2 to 26 3/8; and utility Peoples Energy, up 1/4 to 30 1/8.
* On the downside, weak earnings sent McDonnell Douglas plummeting 3 3/8 to 36 3/4. Also, Aetna Life slumped 1 1/4 to 43 3/8 on a poor earnings report. Aetna disclosed a troubling rise in bad mortgage loans in its portfolio.
* Many technology issues continued to rally, powering the NASDAQ market higher. Autodesk surged 2 1/4 to 42 1/2, Motorola gained 1 to 85 5/8 and Intel was up 3/4 to 59 3/4. Dell Computer leaped 2 3/8 to 23 after Goldman Sachs added the stock to its recommended list.
* The most actively traded NYSE issue was Santa Monica-based hospital chain National Medical Enterprises, which plunged 1 1/2 to 14 3/4 after eight insurance companies sued the firm, alleging that it carried out a scheme to bilk them with false claims. Rival Humana slid 3/8 to 23.
* While the hospital giants sank, some smaller health care companies attracted buyers. Homedco rose 1 to 28 1/4, Salick Health Care added 1 to 11 3/4 and Quantum Health gained 1/2 to 25.
* Fleet Mortgage Group finished at 23 3/8 after its initial public offering was priced at 23 a share.
Overseas, Tokyo stocks rose sharply for a second day, with the Nikkei average jumping 354.68 points or 2.3% to 15,910.28 for a net gain on the week of 412.49.
In Frankfurt, the DAX average closed at 1,615.42, down 8.57 points on the day and up 5 points for the week. London’s Financial Times 100 index lost 12 points to 2,399.6 but still was up 22.4 on the week.
Credit
The bond market churned, unable to carry on the rally that exploded earlier in the week.
While long-term interest rates have slid sharply since early July as economic reports have pointed to softening business activity, many bond traders now fear that upcoming reports will show renewed economic strength.
“Some of the numbers are beginning to look a little more robust,” said Paul McCormack, trader at Chase Securities Inc. The June factory-order report released Friday was a surprise, for example.
Still, while bond yields inched up overall on Friday, McCormack said the heaviest selling was among the intermediate maturities--five to 10-year bonds--where the market has a heavy supply. Ten-year T-notes now are yielding 6.71%.
By contrast, many investors still are buyers of 30-year bonds, apparently believing that the near 7.5% yield on that issue remains an attractive return.
The federal funds rate, the interest on overnight loans between banks, rose to 3.375%, up from 3.188% late Thursday.
Currency
The dollar declined after trading in a narrow range.
“There’s still too much pessimism about the economy” to lift the dollar from the doldrums, said Earl Johnson, trader at Harris Trust in Chicago.
The dollar settled in New York at 127.15 Japanese yen, down from Thursday’s 127.50. It also closed at 1.475 German marks versus 1.478.
Commodities
Fears that a pending two-day general strike in South Africa could turn violent sent platinum futures soaring on the New York Mercantile Exchange.
Platinum for October settled $7.40 higher at $385.10 an ounce.
Elsewhere, August gold futures closed 90 cents higher at $357.40 an ounce on the New York Comex. Silver added 0.005 cent to $3.94.
Also on the Merc, September light, sweet crude oil settled 4 cents higher at $21.87 a barrel.
