Dow Climbs 55.51 on Profit Reports and Rally in Bonds : Markets: The advance, led by technology and economy-sensitive stocks, is one of the biggest of the year. The dollar closes mixed.
Stocks moved sharply higher for a third consecutive session Tuesday, helped by good corporate earnings reports, a bond market rally and the belief that inflation and interest rates are no longer immediate concerns.
In one of its biggest single-day advances of the year, the Dow Jones industrial average rose 55.51 points to 3,876.83, while in the broader market, advancing issues outnumbered declines by about 7 to 3 on the New York Stock Exchange.
Once again, technology issues and stocks most sensitive to swings in the economy led Wall Street higher.
Motorola, Chrysler and PepsiCo posted stronger-than-expected third-quarter profits, adding to optimism about the entire earnings reporting season and the economy. Profit reporting begins in earnest next week.
* Motorola rose 1 3/8 to 54 1/8, Chrysler jumped 5/8 to 46 1/2 and PepsiCo rose 2 1/4 to 34 3/4.
“The focus has shifted from worries about inflation and interest rates to the economy and earnings,” said Hugh Johnson, chief investment officer at First Albany Corp. “Companies are beginning to see the payoffs of the past few years of restructuring and a stronger-than-expected recovery in Europe.”
The bond market picked up on that sentiment, with the bellwether 30-year Treasury bond yield retreating to 7.86% from 7.90%. Its price, which rises when rates fall, went up 7/16 point, or $4.38 per $1,000 in face value.
Bond traders said large investors, who were off Monday for Columbus Day, returned to buy bonds on confidence that the nation’s economy is losing steam, which made Treasury securities seem like a good deal at current yields. Many were exchanging medium-term notes for long-term maturities.
The lower interest rates were encouraging to stock investors because they cut the cost of money to companies and make shares more attractive relative to interest-bearing investments.
Meanwhile, the dollar--viewed as a safe-haven currency in times of military conflicts--ended mixed as Persian Gulf tensions receded. But the currency remained at recent high levels, making dollar-denominated assets such as Treasury bonds seem more attractive to investors.
In New York trading, the dollar closed at 1.546 German marks, up from 1.545 on Monday and at 100.25 Japanese yen, down from 100.35.
In part, Friday’s employment report allowed stock investors to focus on earnings and bond investors to stop worrying about inflation, Johnson said. That data showed employment was up but that wages were not rising.
The Dow’s advance triggered the NYSE “downtick rule,” which limits program buying.
Big Board volume was a hefty 355.54 million shares, up from Monday’s 213.21 million, which was held down by the holiday.
Among broader market indexes, the NYSE’s composite index rose 3.24 points 256.38. The Standard & Poor’s 500 rose 6.76 points to 465.80, while the Nasdaq composite index of mostly smaller issues rose 8.76 points to 765.57.
For a third day, stocks that investors believe will benefit most from the economic expansion led the market higher: autos, papers, chemicals and heavy machinery.
Among the market highlights:
* General Motors rose 1 5/8 to 47 1/8 and Ford Motor added 1 1/8 to 29 3/8.
* Procter & Gamble said it expects record sales for the quarter, and its shares shot up 2 1/2 to 62 3/8.
* Apple Computer continued its recent climb, adding 3/4 to 39 5/8 after saying it expects it quarterly results to be above Wall Street forecasts.
* American Medical Holdings rose 1 5/8 to 24 on news of its merger with National Medical Enterprises Inc.
* Biogen Inc. tumbled 2 to 50 on Nasdaq after releasing data on its multiple sclerosis drug, beta interferon. CS First Boston downgraded Biogen to “hold” from “buy,” saying the data was “good but not outstanding.”
* Chiron, which has a rival MS drug, jumped 4 to 65.
* Caterpillar rose 2 3/8 to 55 5/8 and DuPont rose 5/8 to 58 3/8.
* Novell rose 1 1/4 to 15 3/4 and Dell Computer rose 2 to 41 3/4.
The market gained some impetus from higher stock prices abroad. In Europe, Germany’s 30-share DAX average shot up 46.27 points to 2,071.06, while London’s Financial Times 100-share average gained 40.7 points to close at 3,073.0.
Tokyo’s Nikkei 225 average closed up 76.71 points at 19,821.46. Mexico City’s Bolsa index rose 1.68%, or 43.96 points, to 2665.59.
Gold retreated $3.10 on New York’s Comex to settle at $387.60 an ounce. It was the first time gold had fallen below $390 an ounce in six weeks, helping to push the Commodity Research Bureau’s index of 21 commodity futures to a three-month low of 227.29. The index closed at 227.88.
Market Roundup, D8
Interest Rates
30-year T-Bond: 7.86%
1-year T-Bill: 5.96%
