FINANCIAL MARKETS : Techs Push Stocks to New Highs
Stocks surged to record highs Monday on the back of IBM’s surprise $3.3-billion takeover bid for software firm Lotus Development Corp.
Analysts said Wall Street was also hoping that the Federal Reserve Board will cut interest rates to keep the economy from slipping into recession.
At the close, the Dow Jones industrial average was up 32.16 points at 4,476.55, beating the old record of 4,472.75 reached last Thursday.
Several broader market indicators closed at new highs Monday. The NYSE composite index rose 1.52 points to a new high of 288.05, up from the Thursday peak of 286.73. The Standard & Poor’s 500-stock index rose 3.09 points to 535.60, handily surpassing its former record of 533.49 achieved Thursday. The Nasdaq composite index climbed 9.88 points to 882.85, beating its prior high of 879.64, which was reached May 23.
Market analysts were impressed with the better-than-2-to-1 margin by which gainers outnumbered losers on the New York Stock Exchange. Big Board volume came to 337.45 million shares, down from 365.96 million on Friday.
“The leadership is coming from techs,” said Brett Discher, vice president of equity trading at Dain Bosworth. “IBM’s got everyone frothing.”
Enthusiasm for computer, software and other technology stocks was rekindled by news that International Business Machines Corp. was offering to pay $60 a share for Lotus Development Corp., a price that nearly doubled the software maker’s Friday close.
In reaching a record finish, the Dow overcame a setback for IBM, which shed 2 5/8 to 91 1/4 after announcing the Lotus bid.
Lotus’ stock skyrocketed 28 15/16 61 7/16 as some traders bet that a higher bid might emerge.
“On top of all that, declining interest rates helped shore up financial stocks, but there was some profit taking later,” said MMS International’s Bob Walberg.
The Treasury’s main 30-year bond yield, which fell sharply at the opening, closed at 6.51%, down from Friday’s 6.53%. Its price, which rises when yields fall, closed up 5/32 point, or $1.56 per $1,000 in face value.
Analysts said the stock market was holding up well in the face of last week’s disheartening news on the economic front.
In twin reports last Friday, the government said the economy lost 101,000 jobs outside the farm sector last month--the biggest drop since April, 1991--and the index of leading indicators that forecasts economic trends six to nine months ahead fell for the third straight month in April.
The data showed that the economy was in worse shape than previously expected and fueled concern about a recession.
Among Monday’s highlights:
* Technology stocks posting gains were Microsoft, up 1 5/8 to 84 3/4; Sybase, up 1 1/8 to 23 7/8, and Cisco Systems up 1/2 to 45 5/8.
* Elsewhere, Merck rose 1 3/4 to 49 1/4 on expectations that the Food and Drug Administration will approve its osteoporosis drug, Fosamex, by year’s end, analysts said.
* Boeing rose 2 3/4 to 61 3/4 on news that Saudi Arabia has finalized a long-awaited $6-billion order for U.S.-built aircraft.
* J.P. Morgan was up 2 to 74 3/8. Bear Stearns upgraded the stock and raised the company’s earnings estimates, a market source said.
* Kmart gained 1 3/8 to 14 after the company named a new chief executive.
* Morrison Knudsen rose 1 1/8 to 6 1/2. The company’s stock rebounded following news that the company had won a waiver on loan covenants until July 31.
* Seagram fell 1/2 to 30 after it announced the collapse of discussions to bring in Hollywood super agent Michael S. Ovitz to run entertainment giant MCA Inc.
In the currency markets, the dollar rose against most major currencies, helped by speculation that the Federal Reserve Board and other central banks will orchestrate another large-scale dollar-buying campaign this week.
The dollar closed in New York at 84.90 Japanese yen, up from 84.35 on Friday. It also finished at 1.411 German marks, up from 1.409.
* Market Roundup, D8
