FINANCIAL MARKETS : Stocks, Bonds Gain on News of Slower Growth
U.S. stocks kicked off the second quarter with a modest rally Monday as bond yields fell again, ignoring--as usual--the anemic dollar.
The Dow industrial average added 10.72 points to 4,168.41, just shy of last Thursday’s record of 4,172.56. Renewed takeover activity helped buoy the market.
On the New York Stock Exchange advancing issues narrowly outnumbered declines in moderate trading of 296 million shares. The NYSE composite index inched up 0.45 point to 271.49.
More evidence of a slowing economy helped bonds rally, sending the yield on 30-year Treasury bonds down to 7.39% from 7.43% on Friday. Shorter-term yields also were lower.
A monthly survey of major businesses showed that American manufacturing expanded in March, but at a slower pace than in previous months.
Also, the Commerce Department said Americans’ personal spending slowed sharply in February. While income growth also decelerated, it rose faster than spending, boosting the government’s measure of Americans’ savings rate to the highest level in two years.
For Wall Street, a moderately growing economy with a rising savings rate is practically nirvana, some analysts say: It suggests that inflation and interest rates will remain tamed, while investors will have more cash available to pump into stocks and bonds.
But if investors have stopped paying attention to the dollar’s slide, there were hints Monday that other problems may be brewing for the stock market. Two technology firms warned of weaker-than-expected first quarter earnings.
Stratus Computer plunged 3 3/8 to 27 7/8 after warning that sales and earnings will be below estimates.
And after the market closed, database software firm Sybase said its quarterly results will be sharply below expectations because of slower sales and digestion problems with a recent merger.
Sybase shares closed at 39 1/8, but were down 9 7/8 in electronic after-hours trading.
Still, analysts remain optimistic that first-quarter earnings overall will be strong, despite the weaker economy.
Among Monday’s highlights:
* Raytheon’s surprise $2.3-billion takeover bid for E-Systems sent the latter’s shares up 18 5/8 to 64, while Raytheon fell 1 1/8 to 71 3/4.
Other defense stocks rallied in sympathy. General Dynamics rose 1 to 48, Logicon gained 1 to 34 1/4, Northrop added 1 to 49 7/8 and Litton Industries jumped 1 1/2 to 37 3/8.
* In other takeover news, Horizon Healthcare agreed to buy Continental Medical Systems in a stock swap valued at $502 million. Continental surged 3 3/4 to 11 3/8 while Horizon slumped 3 1/2 to 23 1/4.
* Technology shares were mixed after last week’s selloff. Intel surged 3 5/8 to 88 1/2, System Software jumped 2 to 27 and IBM added 3/4 to 82 7/8, but Microsoft lost 1 1/8 to 70 and Compaq fell 1 to 33 3/8.
* Investors returned to many classic growth issues that typically fare well in a slower economy. Disney jumped 1 1/8 to 54 5/8, Coca-Cola shot up 1 3/8 to 57 3/4, Pfizer gained 1 1/4 to 87 and Schering-Plough surged 1 7/8 to 76 1/4.
* Mobil dropped 2 1/8 to 90 1/2 on a downgrading of the stock by Donaldson, Lufkin & Jenrette, which cited the stock’s recent surge.
* Morrison Knudsen rose 1 to 7. The troubled engineering firm named a former Chrysler executive its new chairman.
In Tokyo, the 225-share Nikkei index opened the new Japanese fiscal year with a plunge, falling 758.66 points or 4.7% to 15,381.29--lowest since August 1992. The market was reacting in part to another record low in the dollar.
In Europe, Frankfurt’s DAX index ended at 1,930.82, up 8.23 points, while London’s FTSE-100 index added 5.2 points to 3,143.1.
In Mexico City stocks staged a big rally thanks to what traders called speculative buying on low volume. The Bolsa index leaped 90.34 points or 4.9% to 1,923.17.
