Dow Extends Streak of New Highs : Market Overview
Blue chip stocks edged into record ground for a third day, buoyed by fresh buying after a bout of profit taking. The broad market also closed strong.
Long-term bond yields were flat to slightly higher, as the big bond rally of recent weeks continued to sputter.
Stocks
The market suffered from profit taking for most of the day, then rallied convincingly near the close, analysts said.
The Dow Jones industrial average rose 6.22 points to end at 3,478.34, topping Tuesday’s record finish of 3,472.12. Most broader indexes posted bigger gains and also hit new highs.
On the New York Stock Exchange, winners beat losers by about 10 to eight. Volume eased to 255.61 million shares.
James Schroeder, an analyst at MMS International, said he was somewhat surprised that the Dow’s 65-point surge on Monday had not prompted a heavier correction. “Profit taking so far has been limited,” he noted.
Still, the market continues to churn, as many stock groups come into favor for a day or two, only to be slammed lower quickly thereafter. Analysts say investors appear to believe that the economy is improving, but their active trading in and out of key stocks suggests an undercurrent of uncertainty.
Among the market highlights:
* Health care stocks, beaten up badly in recent months, rocketed as investors cheered a drug industry proposal to voluntarily restrain price increases. The move is viewed as an attempt by the industry to stop the Clinton Administration from imposing more severe price controls.
Among drug stocks, Pfizer soared 3 1/2 to 63 1/4, Bristol-Myers added 1 3/8 to 58 1/2, Merck jumped 1 7/8 to 40, Warner Lambert shot up 2 7/8 to 69 3/4, Schering-Plough rose 2 to 61 1/2, and Amgen inched up 3/4 to 34.
Health maintenance organization stocks also recovered. Pacificare A surged 3 1/4 to 37, U.S. Healthcare leaped 3 3/8 to 46 5/8, United Healthcare rose 2 to 48 3/8, Foundation Health gained 2 1/8 to 28 3/4, and FHP International jumped 1 3/8 to 20 3/8.
* Banking stocks surged after President Clinton unveiled a program to encourage new lending. The program is expected to give some relief to banks burdened with bad real estate loans.
Among major banks, BankAmerica jumped 1 3/8 to 54 3/8, Wells Fargo added 7/8 to 109 1/2, Union Bank was up 1 1/4 to 38 1/4, Banc One rose 2 to 54 1/2, Citicorp gained 7/8 to 28 3/4, and J. P. Morgan leaped 2 3/8 to 69 5/8.
*Primerica, which is negotiating to buy American Express’ brokerage arm, continued its streak, rising 2 1/8 to 46 7/8.
Also, retailer J. C. Penney jumped 2 3/8 to 86 after it declared a two-for-one stock split and a 9% dividend increase.
* On the downside, some industrial issues that had risen sharply earlier in the week were hit by profit takers. Alcoa lost 1 1/2 to 71 7/8, Louisiana Pacific dropped 1 3/8 to 75 1/2, Nucor fell 5/8 to 88 7/8, Deere eased 3/4 to 55 3/4, and Caterpillar was off 3/8 to 59 1/4.
* Disney slipped 1/2 to 45. A block of 2.9 million shares was sold from the estate of Sharon Disney Lund, who died Feb. 16. She was the daughter of founder Walt Disney.
Most overseas markets were calm, after surging early in the week. In London, the Financial Times 100-share average added 6.8 points to 2,956.70. In Frankfurt, the DAX average slipped 3.45 points to 1,709.68.
In Tokyo, the Nikkei average inched up 10.33 points to 17,858.63.
Credit
The bond market rally was stalled for a third straight day as traders focused on more signs of economic strength.
The tone was set by testimony on Capitol Hill by Federal Reserve bank presidents, who delivered an upbeat view of the economy.
The yield on the 30-year Treasury bond closed unchanged at 6.74%, but yields on three- to 10-year Treasuries continued to inch higher.
Gib Clark, a trader at Daiwa Securities Inc., said moderate trading was dominated by sellers dumping intermediate-term bonds.
The selling was partly on speculation that banks may begin bailing out of such Treasury securities, as President Clinton presses his plan to encourage bank lending to expand the economy.
Over the last three years, banks have built up massive portfolios of intermediate-term Treasury bonds, preferring to put their money in those safe securities rather than take the greater risks of making loans during economically troubled times.
The federal funds rate, the interest on overnight loans between banks, was 2.938%, unchanged from late Tuesday.
Currency
The dollar settled mixed on world currency markets, caught in the fray between lively trading of Japanese yen and German marks.
Analysts said there appeared to be a downward bias toward the dollar even though the currency posted spotty gains. Many traders were reluctant to commit to the dollar ahead of today’s Commerce Department report on retail sales for February, which is expected to be flat.
The dollar ended at 1.667 marks in New York trading, unchanged from Tuesday. The dollar also settled at 118.05 Japanese yen, up from 117.75.
Commodities
Oil prices fell sharply, driven down by a general acknowledgment that supplies are ample and consumption is lackluster.
April crude oil futures fell 29 cents to $20.39 a barrel, the lowest close in two weeks on the New York Merc.
Elsewhere, near-term gold futures eased 30 cents to $326.30 an ounce on the New York Comex. Silver rose 0.4 cent to $3.56.
Market Roundup, D6
