‘Bargains’ Boost Dow 33 Points : Wall Street: Despite rise in bond yields, investors flock back to stocks. Drug and tobacco issues lead; NASDAQ market also sees a turnaround.
Stocks rose strongly Wednesday as bargain hunters jumped in to grab many issues beaten down recently by Clinton Administration economic proposals.
The market rally was especially notable because it ignored a sudden rise in bond yields, analysts said. The buying suggested that many investors are reluctant to part with the idea that President Clinton’s economic game plan will ultimately be positive for stocks, despite Wall Street’s misgivings.
The Dow Jones industrial average leaped 33.23 points to 3,356.50, recouping another large piece of the 82-point loss on Feb. 16, when details of Clinton’s economic proposals spooked traders.
Advancing issues beat losers 12 to 7 on the New York Stock Exchange, where volume was heavy at 316 million shares.
The NASDAQ market of smaller stocks had its best day since early January. The NASDAQ composite index, which had plummeted 25.15 points, or 3.6%, to 665.39 on Feb. 16, jumped 11.06 points to 662.46.
The stock market had languished for much of the last week as investors reacted fearfully to Clinton’s call for major tax hikes, health care cost restraints and other severe measures designed to keep the economy moving while paring the federal deficit.
While bond yields tumbled to record lows in the wake of Clinton’s plan--anticipating a slower economy, despite the President’s pledge of new growth--the same expectations caused stock investors to turn cautious about the outlook for consumer spending and corporate profits.
But by Wednesday, profit taking in many stock groups apparently pushed prices to levels that bargain-minded investors could no longer ignore.
“It’s a bounce back in all the oversold groups,” said Tony Dwyer, market strategist at Sherwood Securities. Classic growth stocks, in particular, “are having a nice little snap back,” Dwyer said.
Drug stocks, for example, continued a powerful rebound that began Tuesday. Drug issues have been among the most beaten-down stocks because of concerns that the federal government will seek to cap drug prices to restrain health care costs.
But Wednesday’s rally also saw renewed buying of many industrial and retail stocks whose fortunes are directly tied to the economy. Thus, investors appeared to be betting that Clinton’s plan still allows for decent growth.
A smaller than expected drop in January durable goods orders helped buoy sentiment about the economy. Analysts had expected orders to fall 3% after December’s 8.7% surge, but the decline was a mere 1.7%.
Among the market highlights:
* The health care stock rally was led by Warner-Lambert, up 2 to 65 7/8; Sunrise Medical, up 1 3/4 to 24 1/8; Abbott Labs, up 1 3/4 to 26, and Medtronic, up 5 1/8 to 75 5/8. Also, Genzyme surged 2 5/8 to 32 1/2, PacifiCare Health A soared 6 to 34 3/4, and U.S. HealthCare rose 4 3/8 to 44 1/2.
* Tobacco stocks, which had been depressed by fears of new federal “sin” taxes, rose broadly. Philip Morris leaped 2 5/8 to 66 1/4, RJR Nabisco gained 5/8 to 8 3/8, and UST Inc. added 1 7/8 to 27 3/4.
* Auto stocks rebounded from a selloff Tuesday. Chrysler soared 2 5/8 to 38 1/2, Ford gained 1 to 45 7/8, and GM rose 7/8 to 37 3/4.
* Retailers were also strong. May Department Stores jumped 2 7/8 to 71 1/2, Wal-mart zoomed 2 5/8 to 62 1/2, Dillard rose 1 1/2 to 46 1/8, and Toys R Us added 1 1/8 to 38 7/8.
Also, Home Depot surged 3 3/4 to 63 1/4 after it announced a 4-for-3 stock split.
* Among industrials, Deere leaped 2 1/2 to 50 3/4, Caterpillar added 1 1/4 to 56 5/8, Goodyear was up 1 1/4 to 68 1/4, Cummins rose 1 to 86, and USX-U.S. Steel rose 1/2 to 36 3/4.
* Technology stocks were mixed. Intel jumped 4 1/2 to 117 3/4, Hewlett-Packard gained 2 1/2 to 74 3/4, and Microsoft leaped 4 3/8 to 83 7/8.
But Dell Computer sank 6 1/8 to 30 1/8 after withdrawing a 4-million share offering. The company said it expects tighter profit margins in 1994. Another PC loser was Compaq, which dropped 2 3/8 to 45.
Overseas, Frankfurt’s DAX average lost 17.34 points to 1,644.24. In London, the FTSE-100 average eased 1.0 point to 2,815.0.
In Tokyo, the Nikkei average shed 64.21 points to 16,798.94.
In Mexico City, the Bolsa index suffered another selloff, dropping 26.98 points to 1,515.68.
Credit
The spectacular Treasury bond rally came to an abrupt halt as a poor auction of new five-year notes gave investors pause.
Bond yields, which have been falling sharply since President Clinton unveiled his economic program last week, turned higher across the board.
The yield on the Treasury’s 30-year bond jumped to 6.88% from Tuesday’s all-time low of 6.82%.
“There’s been a big rally. It’s gone a lot further than most people thought. (Wednesday) was the day that some people decided to say, ‘It’s time to take some profits,’ ” said Robert D. Sbarra, managing director at bond dealer Carroll McEntee & McGinley Inc.
What most analysts said was a normal correction, however, appeared to be exacerbated by an auction of five-year Treasury notes that drew weak demand from securities dealers and retail buyers.
The Treasury sold $11 billion of the notes at an average yield of 5.23%, slightly above expectations.
Still, many traders said the bond rally should resume soon as more investors come to view Clinton’s economic plan as positive for interest rates through 1993.
Other Markets
The dollar firmed against major foreign currencies in dealings inspired more by technical trading than economic developments.
In New York, the dollar closed at 117.48 Japanese yen and 1.627 German marks, up from 117.05 yen and 1.623 marks Tuesday.
Elsewhere, near-term gold futures eased $1.40 to $329.70 an ounce on New York’s Comex. Silver sank 2.2 cents to $3.56.
On the New York Merc, light, sweet crude oil for April rose 5 cents to $20.53 a barrel.
Market Roundup, D6
