FINANCIAL MARKETS : Dow Hits 4th Straight Record; Yields Retreat
Stocks leaped into record territory for the fourth session in a row and bond yields retreated, pushing prices higher, as investors bet on lower interest rates ahead.
An announcement of a major merger in the banking industry also inspired buyers.
The Dow Jones industrial average closed up 42.89 points at 4,553.68, eclipsing Friday’s record closing high of 4,510.79.
The broadly based rally extended beyond the Big Board thanks to the leadership of technology stocks, many of which are listed on the Nasdaq. It propelled the Nasdaq index up 13.44 points, its biggest gain in more than a year, to 922.09, a new record.
Several other popular stock gauges established highs, also beating their prior bests of Friday. The New York Stock Exchange index climbed 2.22 points to 292.18, and Standard & Poor’s 500-stock index jumped 5.39 points to 545.22. The American Stock Exchange index rose 0.81 point to 496.21.
In the broader market, gainers beat losers by better than a 13-9 margin on the NYSE, where volume came to 323 million shares, down from from Friday’s unusually heavy 448.27 million.
Momentum left over from Friday’s advance, when the Dow industrials closed above 4,500 for the first time, started stocks out on firm footing and the market never looked back.
Later, Wall Street derived strength from the bond market, where the yield on the benchmark 30-year Treasury bond finished at 6.56%, down from 6.61% on Friday. Its price, which rises when yields fall, rose 23/32 point, or $7.19 per $1,000 in face value.
Stock and bond traders bought in reaction to fresh speculation that further declines in interest rates are imminent.
Energizing an ongoing market debate, the Wall Street Journal and Barron’s each reported that several members of the Federal Reserve Board’s Open Market Committee favor lower rates to help strengthen the lethargic U.S. economy.
In the absence of major new economic releases, the news spurred modest buying of Treasury bonds, which, like other fixed-return investments, tend to rise in value amid falling rates on new securities.
Market analysts said desires by mutual funds to be aboard Wall Street’s bandwagon, especially now as the second quarter comes to a close, has provided a powerful buying incentive to professional investors.
Merger news also motivated buyers. Word that First Union intends to acquire First Fidelity in a $5.4-billion stock swap deal generated speculation about consolidation in the banking industry.
Banking stocks were doubly blessed. They benefited from the merger talk and from the interest rate speculation.
Among Monday’s highlights:
* Banking issues that gained included First Fidelity, up 10 1/4 to 59; Citicorp, up 1 1/4 to 57 1/8; Chemical, up 1 1/2 to 46 7/8; Wells Fargo, up 3 3/4 to 182 5/8; Mellon Bank, up 1 1/2 to 43 3/8, and First Interstate Bancorp, up 1 1/2 to 82 3/8.
* Technology stocks charged ahead, led by computer chip makers. Texas Instruments jumped 6 3/8 to 138 7/8 in heavy volume. Other active issues included Motorola, up 3 7/8 to 64 1/2; Micron Technology, up 3 to 53, and Compaq, up 3 1/8 to 43.
Microsoft gained 2 7/8 to 89 7/8. The software maker scored a victory last week as an antitrust settlement with the government was reinstated by an appeals court.
Analysts cited a confluence of factors for the rise in tech stocks, including a widening belief that the group may be recession-proof.
* Sunbeam fell 5 to 13 3/8 after the firm’s investment rating was reduced after the company disclosed that its earnings will probably fail to meet its expectations.
* Time Warner rose 2 5/8 to 43 1/8 after the “Batman Forever” movie broke the U.S. box office record for an opening weekend.
Overseas stocks were mixed. Frankfurt’s 30-share DAX average climbed 21.96 points to end at 2,141.75. In London, the FTSE-100 average closed 15.2 points higher at 3,381.3, a 15-month high. Tokyo’s 225-share Nikkei average was down 3.11 points at 14,700.06.
Mexico’s Bolsa index slipped 19.46 points to 2,022.43 points, paring some of last week’s gains.
