FINANCIAL MARKETS : Profit Outlook Buoys Stocks; Dow Up 22.21
Investors remained optimistic about corporate profits and shrugged off anxieties about pending price statistics, sending the stock market higher Thursday.
The rally was helped by gains in technology and basic materials stocks such as chemicals, paper and mining, which often rise and fall with sentiment about the overall economy.
The Dow Jones industrial average rose 22.21 points to 3,908.46 on Big Board volume of 296.02 million shares, up from 292.05 million on Wednesday. In the broader market, advancing issues outnumbered declining ones about 11 to 7 on the New York Stock Exchange.
“We’re in a fairly solid economic upturn,” said James Solloway, director of research for Argus Research in New York. The Federal Reserve Board’s “increases in interest rates have had some impact in those industries that are highly sensitive to interest rate trends, like housing, but the economy on the whole is in good shape--particularly the manufacturing sector.”
Stocks and bonds were helped Thursday morning by comments from Fed Vice Chairman Alan Blinder.
At a news conference, Blinder offered reassurance that he is committed to fighting inflation. He was responding to reports that he was more concerned about stimulating employment. Such a position would run contrary to Chairman Alan Greenspan’s stance, but Blinder said he and Greenspan have “no operational differences of any significance.”
The Fed has raised interest rates five times this year, saying it was acting to cool economic growth and keep prices stable. Investors are concerned about any weakness in the Fed’s resolve on this issue.
Bond prices retreated later in the day as investors became uncertain about the August producer price index, a measure of wholesale-level inflation due out today. A PPI report showing an inflationary trend could prompt the Fed to raise rates again. Bond investors are highly sensitive to interest rates because rising rates hurt the value of bonds, which pay a fixed rate.
Long-term interest rates were unchanged in light trading. The yield on the Treasury’s 30-year bond remained at 7.56% and the bond’s price edged up 1/32 point, or 31 cents per $1,000 in face value.
Stocks hung on, however. Anthony O’Bryan, a market analyst with A.G. Edwards in St. Louis, said that showed the two markets are diverging.
“Stocks are being propelled higher by earnings and the bond market is being restrained by the Fed,” he said.
Among the market highlights:
* Minnesota Mining & Manufacturing said it expects earnings growth of better than 10% a year for the next three years, and its stock rose 1 5/8 to 56 3/4. Dow Chemical gained 1 1/8 to 76 1/2; paper company James River was up 1 to 24 3/8.
* Hewlett Packard, the electronics and computer company, gained 2 3/8 to 90 1/8 on the NYSE after the Wall Street Journal published details about advances made by H-P and other U.S. technology companies over competitors in Japan. Compaq Computer gained 1 1/8 to 36 5/8, and computer chip maker Texas Instruments gained 1 1/2 to 77; Microsoft gained 1 1/16 to 57 5/16.
* California-based insurer 20th Century Industries said recent earthquake claims are expected to reach $815 million, up from a previous estimate of $685 million. Its stock fell 3 1/8 to 9 1/2.
* Retailers were actively traded on the NYSE. Kmart rose 1/2 to 18 after the company announced it would close 110 stores as part of a restructuring. Some other retailers gained as well. Sears rose 1 3/4 to 49 5/8.
Stocks closed lower in Tokyo on arbitrage-linked selling. The Nikkei-225 average ended 106.02 points lower at 19,917.78. Frankfurt’s DAX-30 share average closed 8.55 points higher at 2,172.37. In London, the FTSE-100 average closed at 3,180.0, down 23.9 points.
In Mexico City, share prices closed higher for the third straight session, with the Bolsa index rising 23.24 points to 2,762.16.
The dollar closed at 99.60 Japanese yen and 1.556 German marks in New York, up from 99.45 yen and 1.551 marks on Wednesday.
