Dow Adds 1.62; Smaller Stocks Show Strength : Market Overview
Highlights of Monday’s market activity, compiled from Times staff and wire reports:
* Stocks closed higher as the market extended its winning streak to five straight sessions. The Dow Jones industrial average rose 1.62 points to 3,395.40, while broader indexes were stronger.
* Treasury bond yields showed little change, as investors waited on a July unemployment report due later this week.
* Platinum and gold fell sharply when the launch of a two-day general strike in South Africa apparently left mines unaffected, erasing supply worries.
Stocks
Analysts said the market rally continued to show remarkable staying power after last week’s Dow index gain of 108 points.
“Sellers weren’t very anxious (Monday), and buyers came in when the market dipped even just a little bit,” said Alfred Goldman, analyst at brokerage A. G. Edwards & Sons in St. Louis.
While the Dow remains below its June all-time high of 3,413.21, both the S&P; 500 index and the NYSE composite index rose Monday to their fourth-straight record closes.
Also, the NASDAQ composite index of smaller stocks gained 1.53 points to 582.36, a 0.3% rise that was the strongest performance of any major index. However, the NASDAQ index still is well under its all-time high of 644.92.
Traders said profit-taking caused choppy market swings throughout the day. But by the close, advancing issues outnumbered declines by 5 to 4 on the New York Stock Exchange.
Big Board volume came to 164.46 million shares, down from 180.58 million Friday.
Stocks reacted little to mixed reports on the economy. The government said construction spending fell 1.5% in June. But a survey of purchasing executives showed that the manufacturing sector continued to grow in July, posting its sixth consecutive advance.
Analysts said many investors continue to focus on the good news that helped spark last week’s rally: A drop in long-term interest rates, falling inflation expectations and better-than-expected corporate earnings reports.
Also, a report Monday from Standard & Poor’s Corp. provided more fodder for bulls, who argue that corporate America is on the mend, despite the weak economy: S&P; said 100 companies raised dividends to shareholders in July, up from 82 a year earlier. It was the seventh consecutive month of year-over-year improvement in the dividend trend.
However, the number of companies cutting dividends also rose in July, to 16 from just 9 a year earlier, S&P; said.
Among Monday’s highlights:
* Many classic growth stocks attracted new buyers. Retailer Home Depot surged 1 3/8 to an all-time high of 51 5/8. There was no specific news.
Other growth issues gaining included Coca-Cola, up 1 1/8 to 43; Kellogg, up 3/4 to 65 3/8; biotech firm Amgen, up 1 1/2 to 67; and United Healthcare, up 2 1/4 to 94 1/4.
Also, Merck rose 1 to 52 7/8 after several analysts said the company’s new prostrate drug, Proscar, will become a billion-dollar product by decade’s end.
* Makers of slot machines and video gaming terminals rocketed. The stocks have recently come back into favor after a spring slump. International Game Technology jumped 1 to 36 7/8, and Video Lottery soared 1 5/8 to 33 5/8.
* Energy stocks, which were market leaders in July, advanced again. Exxon rose 3/4 to 64 1/4, Mobil gained 3/4 to 65 7/8, Unocal added 1/2 to 27 1/8, Enron was up 1/2 to 45 7/8 and Halliburton gained 5/8 to 32 1/4.
* Technology issues also provided leadership. Intel advanced 1 1/8 to 60 7/8, Micropolis rose 5/8 to 11, Sun Microsystems jumped 1 1/2 to 28 1/4, Dell Computer gained 1 1/8 to 24 1/8 and Motorola leaped 1 7/8 to 87 1/2.
* On the downside, industrial issues were lackluster after big gains last week. Monsanto fell 1 1/2 to 53 1/2 after an analyst lowered his rating to “sell,” citing the federal government’s approval of Ivax’s generic version of a Monsanto anti-hypertension drug. Miami-based Ivax, traded on the Amex, soared 4 3/4 to 29.
Among other industrial names, Dow Chemical slid 1 3/8 to 57 1/8, Cummins Engine lost 7/8 to 70 1/4, Caterpillar fell 1/2 to 54 3/4 and Kimberly Clark gave up 1 5/8 to 55 1/4.
* GM fell 5/8 to 41 on a report that it was slashing its third-quarter production plans. GM denied the report.
* McDonald’s fell 1 1/8 to 42 3/4 in heavy trading. Merrill Lynch cut its intermediate-term rating to “above average” from “buy,” citing expectations that McDonald’s anticipated new dinner menu--expected in 1993--may be delayed.
* National Presto Industries tumbled 4 5/8 to 56 7/8. The small-appliance maker reported lower second-quarter earnings on Friday.
Overseas, Tokyo’s Nikkei average fell 200.83 points or 1.3% to 15,709.45, giving up some of the gains scored late last week.
In London, the Financial Times 100-share average jumped 20.6 points to 2,420.2.
But in Frankfurt, the DAX average lost 20.71 points to 1,594.71, its lowest level in seven months.
Credit
Bond trading was light after last week’s big rally, and traders expect slow activity until Friday’s report on July unemployment.
The 30-year Treasury bond’s price gained 1/16 point, or 63 cents per $1,000; its yield held at 7.45%. Most shorter-term bond yields were flat as well.
Traders said Monday’s purchasing-managers’ report showing that the manufacturing sector continued to grow in July led to early selling of bonds.
But the report didn’t provide particularly strong evidence of an economic rebound, traders said. So the selling tapered off as the day wore on.
Also, a Treasury announcement that the government will need to borrow $75 billion in the current quarter didn’t move the market, analysts said. The original estimate was $115 billion to $120 billion in borrowing needs, but analysts have long expected that figure to be reduced because funds needed to continue the S&L; bailout haven’t been approved by Congress.
On Wednesday the Treasury will announce the exact makeup of its major refinancing plans for the quarter: the sale of three-, 10- and 30-year securities next week.
The federal funds rate, the interest on overnight loans between banks, was 3.188%, down from 3.375% Friday.
Currency
The dollar was mixed against most currencies as traders waited for more definitive economic news later in the week.
The dollar has plummeted this summer, and many experts believe that it will go lower. But for now, “people would like to have more news to make up their mind,” said Peter Wild, first vice president at the New York branch of Bank Julius Baer & Co.
In New York, the dollar inched up to 1.475 German marks from 1.474 Friday. It rose to 127.20 Japanese yen from 127.15.
Many traders are awaiting July’s U.S. jobless figures, due Friday. A higher number could signal a further drop in interest rates, which would be negative for the dollar.
Commodities
Platinum and gold prices fell sharply in New York when the start of a two-day general strike in South Africa failed to affect mines.
October platinum dropped $6.80 to $378.30 an ounce on the New York Mercantile Exchange.
Meanwhile, gold for August delivery sank $4.80 to $352.60 an ounce on New York’s Comex. September silver fell 5 cents to $3.89.
Strike worries have been partly behind the resilience in gold prices in particular lately. If the mines were affected by the strike--potentially cutting off supplies--prices would be expected to rise.
Elsewhere, oil and refined products fell in quiet trading on the New York Merc. Light, sweet crude oil for September fell 29 cents to $21.58 a barrel.
Signs of easing U.S. tensions with Iraq have allowed oil prices to fall back.
Market Roundup, D8
