Dow Climbs 55.51 on Profit Reports and Rally in Bonds : Markets: The advance, led by technology and industrial issues, carries many stocks higher. But some doubt its staying power.
Stocks surged in a broad rally Tuesday, helped by strong corporate earnings reports and a sudden drop in bond yields and gold prices.
The Dow Jones industrial average jumped 55.51 points, or 1.5%, to 3,876.83 in heavy Big Board trading of 355 million shares. It was the Dow’s third straight gain.
Analysts said the market’s advance was impressive, but they also warned that it may constitute little more than a natural “snap back” from the deep selloff of recent weeks.
“The odds favor us going up some more but then giving it back,” said Gregory Nie, analyst at Kemper Securities in Chicago. He noted that many investors remain skittish about the outlook for interest rates and inflation as the economy continues to grow.
Nonetheless, some investors seemed cheered by healthy third-quarter earnings reports from a variety of blue-chip companies, including semiconductor maker Motorola, Big Three auto maker Chrysler and soft drink giant PepsiCo. Bullish Wall Streeters have been counting on strong earnings to give investors a reason to continue to buy stocks, even though interest rates have risen sharply this year.
“The focus has shifted from worries about inflation and interest rates to the economy and earnings,” said Hugh Johnson, chief investment officer at brokerage 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.”
Some experts, noting that the Dow had jumped 23.89 points Monday and nearly doubled that gain Tuesday, said investor sentiment may have turned in the wake of last Friday’s September employment report. That report showed job creation continues at an impressive pace but isn’t so strong as to suggest an overheating economy.
Indeed, a report in the New York Times on Tuesday indicated that many Federal Reserve Board governors are willing to wait for more economic data before deciding whether to tighten credit for a sixth time this year.
The Fed story helped spark a powerful rally in the bond market, which was closed Monday for the Columbus Day holiday. The yield on the 30-year Treasury bond, which closed at 7.90% on Friday, sank as low as 7.83% early Tuesday.
Falling gold prices also stoked bonds by hinting at easing inflation worries. Near-term gold futures contracts on the Comex slid $3.10 to $387.60 an ounce.
But later in the day, the bond rally fizzled after retailing tracker Johnson-Redbook Service said U.S. retailers’ sales in the week ended Oct. 8 were up nearly 10% from a year ago. That suggested new strength in the economy.
By the close, the 30-year T-bond yield was at 7.86%.
The stock market, meanwhile, didn’t exhibit the breadth of buying that some analysts said would be expected with the Dow up 55 points and with Mideast tensions apparently easing. Winners topped losers 15 to 7 on the NYSE and by just 15 to 12 on the Nasdaq market.
“I think the upper-3,800 region (on the Dow) is going to be tougher to get through” than on previous rally attempts this year, said Kemper’s Nie, noting that the market suffered a number of serious “technical” breakdowns in the selloff of recent weeks.
Among Tuesday’s highlights:
* Blue-chip issues rising on earnings reports included Chrysler, up 5/8 to 46 1/2; PepsiCo, up 2 1/4 to 34 3/4; Procter & Gamble, up 2 1/2 to 62 3/8, and Gannett, up 5/8 to 47 7/8.
* Many industrial issues rebounded sharply. Ford and GM performed better than Chrysler’s shares, up 1 1/8 to 29 3/8 and 1 5/8 to 47 1/8, respectively.
Elsewhere, GE rose 1 1/2 to 48 3/8, Caterpillar gained 2 3/8 to 55 3/8, Deere jumped 2 1/4 to 70 3/4, Owens-Corning leaped 1 3/4 to 31 5/8 and TRW shot up 2 3/8 to 74.
* Technology stocks were hot. Motorola surged 1 3/8 to 54 1/8 on its earnings news. Other winners included Sun Microsystems, up 1 3/4 to 30 3/4; Autodesk, up 1 3/8 to 68 1/4; Xerox, up 2 to 109 1/4, and Powersoft, up 3 5/8 to 58 7/8.
* Among classic growth issues, Coca-Cola rocketed 1 3/8 to 50 3/8, Mattel gained 1 3/8 to 27 3/4 and Anheuser-Busch rose 1 3/8 to 52 1/4.
In overseas trading, some markets’ gains helped prime Wall Street. Frankfurt’s 30-share DAX index shot up 46.27 points to 2,071.06 on continued optimism about this week’s national elections.
In London, the FTSE 100 index rose 40.7 points to 3,073.0, while Tokyo’s Nikkei 225 index added 76.71 points to 19,821.46.
In Mexico City, the Bolsa index leaped 43.96 points to 2,665.59.
In currency trading, the dollar--viewed as a safe-haven currency in times of military conflicts--ended mixed as Persian Gulf tensions receded. In New York, the dollar closed at 1.546 German marks, up from 1.545 on Monday and at 100.25 Japanese yen, down from 100.35.
Market Roundup, D8
Interest Rates
30-year T-Bond: 7.86%
1-year T-Bill: 5.96%
