NASDAQ Posts Record High; Dow Up 11.07 : Market Overview
Hopes for continued economic improvement helped the stock market post modest gains in a session dominated by individual reactions to year-end earnings reports. The NASDAQ market closed at a new record high.
* Interest rates fell amid speculation that the government plans to reduce the size of its 30-year financings.
Stocks
The Dow Jones average was aided by the rising strength of big-name shares such as General Motors and Philip Morris, and NASDAQ stocks again hit a record at the close.
The Dow closed up 11.07 points to close at 3,253.02. Advancing issues outnumbered those declining by more than 5 to 4, with the New York Stock Exchange posting a volume of 257.62 million shares. On Wednesday, 268.79 million shares changed hands.
The NASDAQ broke through the 700 level to close at a record high of 700.76, with a gain of 3.32 points.
While the NASDAQ market hit a record high, one of its leading companies, Microsoft, passed IBM as the world’s most valuable computer company. The software maker’s 1 1/8 rise to 89 1/2 put its total value at just over $27 billion, while IBM’s decline of 1/2 to 46 3/8 lowered its value to $26.5 billion.
The decline in bond rates, after President Clinton was said to weigh a shift to short-term borrowing, also provided a positive backdrop.
The Federal Reserve’s Beige Book, a periodic report based on anecdotal evidence supplied by the 12 Federal Reserve banks, showed signs of an economy in recovery.
In the Fed banks’ most upbeat assessment of the economy’s state since last spring, Christmas sales were strong, and the economy gained just about everywhere except the West Coast.
In addition, earnings reports so far have been leaning toward positive rather than negative surprises, an analyst said.
But others believe that there was no very strong message or theme to give direction to the market. Robert Stovall, president of Stovall/21st Advisers, said: “I don’t see any real trends. Stocks are responding to spot news.”
But solid gains by GM, up 1 1/4 to 37 1/2, and Philip Morris, up 1 3/8 to 71 7/8, bolstered the market as a whole. Analysts said much of the day’s activity centered on a few groups.
“You’ve got big redistribution in the technology, drugs and financials, primarily the banks,” said one trader. “Those three groups in particular is where the action seems to be centered.”
Among the market highlights:
* Software stocks, including Microsoft and Computer Associates, which climbed 4 1/4 to 25 1/4 on record earnings, were among the more prominent technology gainers.
* Tandem Corp. lost 2 1/8 to 14, topping the most active list on the Big Board after its first-quarter profit fell sharply below analysts’ estimates.
* But on the plus side, Computer Associates rose 4 1/4 to 25 1/4 after posting record third-quarter earnings. Dean Witter upgraded its rating.
* Altera Corp., which reported fourth-quarter results, added 1 5/8 to 15 3/4. Creative Technology surged 5 to 29 1/2 after posting higher second-quarter profit.
* American Telephone & Telegraph, up 1 3/8 at 55 1/4, established a new high since the breakup of the Bell System nine years ago, and most of the “baby Bell” regional operating companies also advanced.
* Bell Atlantic, which reported higher fourth-quarter earnings, rose 7/8 to 52 1/8; Southwestern Bell 1 1/4 to 73 3/8; Nynex 1 3/8 to 84 1/2, and Bell South 7/8 to 54 1/8.
* Auto stocks benefited from signs of continued improvement in the economy. General Motors rose 1 1/4 to 37 1/2; Chrysler 3/8 to 38 1/4 and Ford Motor 5/8 to 47 1/4.
In overseas trading, London’s Financial Times 100-share average closed 24.6 points higher at 2,773.3 on hopes of a cut in interest rates. Frankfurt’s 30-share DAX average closed 1.21 points lower at 1,573.67. Stocks ended mixed in Tokyo, with the 225-share Nikkei average rising 28.50 points to 16,538.68.
Credit
Bond yields rose early in the day but retreated after the Treasury announced that it will decrease by $250 million the amount of two-year notes that it will auction next week and increase the five-year auction by the same amount.
The 30-year bond’s yield fell to 7.30% from Wednesday’s close of 7.33%. Its price, which moves inversely to its yield, rose 3/8 point, or $3.75 per $1,000 in face amount.
The shift toward more five-year notes signaled to some dealers that the Treasury intends to cut the size of its 30-year bond auction, to be announced Feb. 3.
“That shift would tend to lengthen the average maturity of Treasury debt,” said Michael Moran, chief economist at Daiwa Securities America Inc. “One possible argument is that they took this step today to offset or neutralize the effects of lower bond auctions on the average maturity of debt.”
The market largely ignored the Beige Book report.
Both pieces of news should have been bearish for bonds, as they could portend higher interest rates. But the report also said there was “little evidence of significant upward pressure on prices,” an indication that inflation is under control.
The federal funds rate--the interest on overnight loans between banks--was 2.938%, down from 3% late Wednesday.
Other Markets
News of worsening economic conditions in Europe pushed up the dollar in moderate trading.
The market appeared to focus on Europe also because of a dearth of significant domestic economic news. The Fed’s Beige Book report gave the dollar only minor support, traders said.
The dollar closed in New York at 124.90 Japanese yen and 1.614 German marks, up from 124.625 yen and 1.604 marks respectively, on Wednesday.
The British pound settled at $1.523, less expensive than Wednesday’s $1.544.
In the commodities markets, gold fell 70 cents to $329.20 an ounce, and silver fell 1.5 cents to $3.723 an ounce on New York’s Commodity Exchange.
Energy futures prices on the New York Mercantile Exchange 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 delivery in March closed up 31 cents a barrel at $18.81.
Market Roundup, D6
