NASDAQ Tops 700 First Time; Dow Up 11.07 : Market Overview
Hopes for continued economic improvement helped stocks post modest gains overall. Technology stocks were the standouts again, driven by strong earnings reports. The tech sector led the NASDAQ composite index to a record close above 700 for the first time.
* Bond yields were lower amid further speculation that the government plans to reduce the size of its 30-year bond financings.
Stocks
On the first full day of President Clinton’s term, Wall Street appeared confident that the economy is on the right track.
The Dow Jones industrial average added 11.07 points to 3,253.02, as advancing issues outnumbered decliners by more than 5 to 4 on New York Stock Exchange volume of 257.62 million shares.
More significant, the red-hot rally in smaller stocks continued unabated. The NASDAQ composite index gained 3.33 points to 700.77, a record close and the first close above the 700 mark. Volume was 228 million shares.
In a powerful sign of the NASDAQ market’s challenge to the NYSE’s dominance, NASDAQ-traded Microsoft now has passed NYSE-traded IBM as the world’s most valuable high-tech company.
Microsoft stock rose 1 1/8 to 89 1/2 while IBM fell 1/2 to 46 3/8. At those prices, the value of all Microsoft stock is $26.8 billion, while the value of all IBM shares is $26.5 billion.
As investors seek to cash in on the improving economy, they are especially drawn to smaller companies--and new-technology businesses--that appear to have greater growth prospects than many aging blue chips.
Thursday, the Federal Reserve’s “Beige Book,” a periodic report on the American economy by region, showed more evidence of recovery in nearly all areas.
The Fed report was underscored by another rash of healthy fourth-quarter earnings reports, especially in the technology and banking industries.
Among the market highlights:
The Dow was led higher by industrial issues that are most sensitive to the economy, including Bethlehem Steel, up 7/8 to 17 1/2; GE, up 7/8 to 83 1/2; GM, up 1 1/4 to 37 1/2; International Paper, up 1 1/4 to 63 1/8, and 3M Co., up 1 1/8 to 99 3/8.
* Tech companies reporting surprisingly good fourth-quarter earnings set off a virtual feeding frenzy in that sector.
Among the firms showing better-than-expected quarterly results were mainframe software giant Computer Associates, which rocketed 4 1/4 to 25 1/4; computer-enhancer Creative Technology, up 5 to 29 1/2, and chip maker Altera, up 1 5/8 to 15 3/4.
Other big gainers included Cisco Systems, up 3 3/4 to 92 1/2; Lotus Development, up 2 1/4 to 22 3/8; Adobe Systems, up 2 1/8 to 44 1/8; Sun Microsystems, up 1 3/4 to 38 1/4, and Read-Rite, up 1 3/8 to 29 1/2.
* On the downside, minicomputer maker Tandem slumped 2 to 14 1/8 after reporting quarterly earnings well below estimates. It blamed “difficult economic conditions.”
* Telecommunications stocks were strong. AT&T; jumped 1 1/4 to 55 1/8, a new high. Also, Bell Atlantic, which reported higher fourth-quarter earnings, rose 7/8 to 52 1/8; Southwestern Bell gained 1 1/4 to 73 3/8; Nynex added 1 3/8 to 84 1/2, and BellSouth was up 7/8 to 54 1/8.
* Some California bank and S&L; stocks resumed the advance begun earlier in the week on economic optimism. BankAmerica added 7/8 to 52 1/4, Wells Fargo gained 1 to 98 1/4, and Coast Savings inched up 1/8 to 13 3/8. But Firstfed fell 2 1/8 to 23 5/8.
* Many drug stocks rebounded for a second day from their recent drubbing. Merck rose 3/4 to 42, Schering-Plough jumped 2 to 59 5/8, Warner-Lambert added 1 1/2 to 65 3/4, and Pfizer was up 1 1/2 to 65.
But Bristol-Myers fell 1 1/4 to 60 3/4. Despite reporting higher earnings, its sales trend was dismal.
* Also disappointing investors on the earnings front was Del Mar-based diet-center operator Jenny Craig, which fell 1 7/8 to 17 1/4 after reporting that operating income fell 22% in the fourth quarter.
* Paramount Communications soared 3 1/2 to 46 1/8 on renewed takeover rumors that suggested a TV network or Baby Bell firm could make a bid.
Elsewhere, Curtiss-Wright shot up 5 1/8 to 38 1/4. Its management said it will pursue the sale of its Flight Systems and Metal Improvement units, which together provided about 80% of the company’s sales in 1992.
In overseas trading, London’s Financial Times 100 index jumped 24.6 points to 2,773.3 on hopes for further interest rate cuts.
In Frankfurt, the DAX average lost 1.21 points to 1,573.67.
In Tokyo, the Nikkei average inched up 28.50 points to 16,538.68.
Credit
Bond yields reacted favorably to the Treasury’s announcement that it will decrease by $250 million the amount of two-year notes that it will auction next week, while increasing the five-year auction by the same amount.
Yields eased across the board, and the drop was most pronounced in the 30-year bond, which fell to 7.30% from 7.33% Wednesday.
The shift toward more five-year notes signaled to some dealers that the Treasury also will cut the size of its next 30-year bond auction, to be announced Feb. 3.
That move has been expected for months. By reducing its long-term borrowings in favor of shorter-term issues, the Clinton Administration could pull long-term yields lower, some experts believe.
What’s unknown, however, is whether a shift to securities in the five-year range also could push yields on those securities higher. There was no sign of such pressure on five-year yields Thursday, despite the announcement.
The federal funds rate--the interest on overnight loans between banks--was 2.94%, down from 3% late Wednesday.
Other Markets
News of worsening economic conditions in Europe pushed up the dollar in moderate trading. The Fed’s Beige Book report also helped.
The dollar closed in New York at 124.90 Japanese yen and 1.614 German marks, up from 124.63 yen and 1.604 marks Wednesday.
Elsewhere, gold fell 70 cents to $329.20 an ounce, and silver fell 1.5 cents to $3.72 an ounce on New York’s Commodity Exchange.
Energy futures prices on the New York Merc gained on word of renewed U.S. hostilities with Iraq, but the market continues to face pressure from abundant supplies. Light, sweet crude oil for March closed up 31 cents a barrel at $18.81.
But traders said the missile attack launched by allied warplanes on Iraqi antiaircraft batteries was only an excuse for the depressed oil market to bounce back.
Market Roundup, D6
