FINANCIAL MARKETS : Dow Hits 4th Straight Record; Yields Retreat
The stock market on Monday scored its biggest gain yet this month, as falling bond yields and another huge takeover announcement sparked a flurry of fresh buying.
The Dow Jones industrial average soared 42.89 points, or 1%, to a new high of 4,553.68, its fourth straight record.
The seemingly unstoppable bull market of 1995 has now pushed the Dow up 18.8% since Jan. 1, and some major stocks--especially in the red-hot technology sector--have more than doubled.
Monday’s rally was supported by a broad decline in bond yields, after the Wall Street Journal and Barron’s magazine both reported that several members of the Federal Reserve Board’s policy-making committee favor lower interest rates to help strengthen the lethargic U.S. economy.
Although bond trading was characterized as fairly light, traders said the market continues to reflect rampant optimism that the Fed will cut rates as early as July.
The yield on the Treasury’s 30-year bond dipped to 6.56% on Monday from 6.61% on Friday, and is nearing the 1995 low of 6.51% set June 6.
A bullish bond outlook from Newport Beach-based Pacific Investment Management Co., which manages $65 billion in bonds, also helped the market. William H. Gross, Pimco’s managing director, told clients in a letter that he thinks long-term T-bond yields could fall as low as 5% in the years ahead.
In the stock market, winners topped losers by 13 to 9 on the Big Board in moderate trading.
Some investors were enthused by banking giant First Union Corp.’s decision to buy First Fidelity Bancorp. in a $5.4-billion deal. An upswing in mergers this year has emboldened Wall Street bulls, who view the activity as a sign that corporate executives don’t believe stocks are overpriced.
“Corporations think they’re cheap,” said Don Hays, strategist at brokerage Wheat First Butcher Singer in Richmond, Va.
As usual, the star sector in the market Monday was technology. Another tech-driven buying wave pushed the Nasdaq composite index of mostly smaller stocks up 13.44 points, or 1.5%, to a record 922.09.
“I hesitate to say they [tech stocks] are the new ‘Nifty Fifty,’ but the same kind of psychology holds,” said Tony Cecin, trader at Piper Jaffray. The Nifty Fifty were a select group of growth stocks considered market darlings by big investors in the early 1970s.
Their prices rose to spectacular heights before the market crashed in 1973-74.
Among Monday’s highlights:
* Semiconductor stocks led the latest surge in tech issues, after chip maker Micron Technology told analysts its profit margins may continue to widen this year.
Micron soared 3 to 53, Texas Instruments jumped 6 3/8 to 138 7/8, Motorola gained 3 7/8 to 64 1/2 and Cirrus Logic zoomed 3 1/8 to 62 3/4. Also, Intel, which split 2-for-1 on Monday, leaped 3 3/4 to 61 3/4.
* Other tech winners included IBM, up 1 1/8 to 93 3/4; Autodesk, up 2 1/2 to 43 3/4; Microsoft, up 2 13/16 to 89 13/16; Compaq, up 3 to 43; General Instrument, up 1 7/8 to 39, and DH Technology, up 3 to 29.
* Banking issues gaining on news of the First Union-First Fidelity merger included Bank of Boston, up 1 1/4 to 36 3/8; First Chicago, up 1 1/4 to 59 1/8; Barnett Banks, up 1 3/8 to 49 7/8; First Interstate, up 1 1/2 to 82 3/8, and Great Western Financial, up 5/8 to 21 1/8.
* Among entertainment issues, Time Warner surged 2 1/2 to 43 1/8. Its “Batman Forever” movie scored a spectacular opening weekend.
* Defense issues also rallied sharply. Lockheed Martin jumped 3 to 63 3/4, McDonnell Douglas added 2 3/8 to 77 7/8, Loral soared 2 1/8 to 51 and Logicon leaped 1 1/2 to 44 1/4.
* Among the day’s losers, Sunbeam plunged 5 to 13 3/8 after the maker of household products said weak consumer demand will depress earnings in the near term.
Also, major oil stocks were weak as crude prices slumped to three-month lows.
Overseas, London’s FTSE-100 index closed 15.2 points higher at 3,381.3, a 15-month high. Tokyo’s 225-share Nikkei average eased 3.11 points to 14,700.06.
Mexico’s Bolsa index slipped 19.46 points to 2,022.43, paring some of last week’s gains.
