FINANCIAL MARKETS : Dow Eases But Broad Market Rises Again
Stocks closed mostly higher Monday in heavy trading, though the streaking Dow Jones industrial average took a breather.
Yields edged down in the bond market, while the dollar firmed.
The Dow average, which had surged 146.63 points last week, meandered on Monday and ended off 0.34 point at 4,702.39.
The broad market advanced, however, pulled up by frenzied buying of many transportation and heavy-industry issues--a bet on a stretched-out economic expansion.
Winners topped losers by 13 to 9 on the New York Stock Exchange, and the blue-chip Standard & Poor’s 500 index added 0.82 point to a record 557.19.
Trading volume was extremely active for a summer Monday at 410 million shares on the NYSE.
Analysts said the market continues to benefit from the afterglow of the Federal Reserve Board’s cut in short-term interest rates last Thursday, a move apparently aimed at keeping the slowing economy from dipping into recession.
As investors focus on the idea that the economy may continue to grow well into 1996, they are flocking back to stocks of industrial and transport companies whose earnings may get a lift from renewed growth.
“It’s a monster run into the cyclicals and a hell of a move for railroad stocks,” said Ralph Bloch, analyst at Raymond James.
The Dow transports index shot up 51.47 points, or 2.8%, to a record 1,890.98--finally surpassing the old record of 1,862.29 set Feb. 2, 1994.
An old Wall Street maxim is that when the Dow industrial and transport indexes are hitting new highs together, it’s a bullish sign for the market as a whole.
But in one bit of bad news, semiconductor maker Advanced Micro Devices reported disappointing second-quarter earnings Monday, after the market closed.
Blaming aggressive pricing on its 486-series chips, AMD reported earnings of 86 cents a share, down from 89 cents a year ago and far below analysts’ consensus estimate of $1.01.
The stock closed down $1.375 at $34.125 in limited after-hours trading. Some analysts said the news could depress high-flying technology issues today if investors fear that AMD’s earnings shortfall is catching.
Among Monday’s highlights:
* Transportation stocks rocketing higher included Burlington Northern, up 3 1/8 to 68 1/2; CSX, up 3 to 84 3/8; Roadway Services, up 4 3/8 to 52 7/8, and United Airlines parent UAL, up 3 to 148.
Also, Southwest Airlines gained 7/8 to 26 1/2 after saying second-quarter earnings will be above expectations.
* Among industrial stocks, Illinois Tool Works surged 2 3/4 to 61 3/4, Dover gained 1 7/8 to 75 3/4, GM rose 3/4 to 51 3/4 and Union Carbide jumped 1 1/2 to 38 1/4.
A strong earnings report from paper company Champion International sent its stock up 3 1/8 to 59.
* Many technology issues continued to advance. Microsoft leaped 3 1/4 to 98 7/8 on growing optimism about sales prospects for its forthcoming new Windows 95 computer operating software.
Also gaining: Dell, up 1 5/8 to 65 7/8; 3Com, up 1 5/8 to 72, and Diodes, up 1 3/4 to 14 1/2.
But Sensormatic Electronics plunged 9 1/8 to 24 1/2 after it forecast that fiscal 1995 earnings would fall short of Wall Street expectations.
* Some bank stocks got a lift from the mega-merger announced between Midlantic Bank and PNC Bank. Winners included First Chicago, up 7/8 to 61; Bank of Boston, up 7/8 to 38; and Chemical Banking, up 1 3/4 to 51 1/8.
* On the downside, casino operator Circus Circus slumped 2 1/8 to 32 1/2 after one analyst trimmed earnings estimates.
In foreign trading, Mexico’s Bolsa stock index surged again, rising 97.08 points or 4% to a seven-month high of 2,554.26 as foreign buyers continue to bet that the country’s current recession will be short-lived.
On the NYSE, Telmex shares jumped 1 63/64 to 35 1/2.
But the Tokyo market’s rally slowed, with the 225-share Nikkei index closing at 16,242.66, up 29.58 points.
In the U.S. bond market, yields closed modestly lower, shaking off Friday’s stronger-than-expected June employment report. The 30-year Treasury bond yield eased to 6.51% from 6.52% on Friday.
The dollar was slightly stronger. In New York it closed at 86.93 Japanese yen, up from 86.80 Friday, and 1.395 German marks, up from 1.393.
