FINANCIAL MARKETS : Dow Jumps to 4,727.29 as Tech Shares Rocket; Nasdaq Trading Surges
Wall Street’s astounding 1995 bull market charged to new highs Wednesday, led once again by red-hot technology shares on the Nasdaq market of mostly smaller stocks.
“Nasdaq is just on fire, it’s like a rolling freight train,” said Scott Bleier, analyst at Josephthal Lyon & Ross.
The Nasdaq composite stock index soared 18.41 points--nearly 2%--to a record 988.63, closing in on the 1,000 mark. The index has surged 31.5% since the start of the year.
Meanwhile, the blue-chip Dow Jones industrial average also advanced powerfully on Wednesday, rising 46.69 points, or 1%, to a record 4,727.29. After the Dow dipped 21.79 points on Tuesday, some investors couldn’t wait to buy in, traders said.
Wednesday’s rally was sparked by healthy second-quarter earnings reports from some key technology companies, including semiconductor giant Motorola and computer disk-drive maker Seagate Technology.
Investors have poured into tech stocks this year as demand for computers and other electronic equipment has boomed, fueling optimism about tech companies’ earnings. With second-quarter profit reports suggesting that that optimism was justified, a new crowd of investors is herding into the stocks.
And because many technology stocks, large and small, trade on the Nasdaq market, the Nasdaq composite stock index’s 31.5% year-to-date gain is sharply above the Dow index’s year-to-date gain of 23.3%.
The latest frenzied buying of tech issues helped boost Nasdaq trading volume to a record 514 million shares on Wednesday, significantly above New York Stock Exchange floor volume of 413 million shares.
Yet the bull market advance of ’95 is much broader than just technology stocks, analysts note. The Nasdaq transportation-stock index, for example, is up 26.7% this year; the Nasdaq bank-stock index is up 25.7%.
On the NYSE on Wednesday, advancing issues led decliners by about 9 to 5, and every broad stock index jumped.
“What’s happening today is we’re in the middle of a mania,” said Jeff Matthews, head of Ram Partners in Greenwich, Conn.
But like many analysts, he is fearful because such manias often end in disaster. “To me it means that things are getting a little more goofy,” he said.
Market bulls, however, say that stocks could continue to rise because corporate earnings still are increasing at the same time that the Federal Reserve Board is signaling it wants lower interest rates. The Fed cut its benchmark short-term rate a week ago.
The combination of earnings gains and lower rates is often a powerful tonic for the market, experts note.
On Wednesday, stocks were helped by optimism that June inflation reports expected today and Friday will show small price increases, which in turn could help push bond yields lower.
The 30-year Treasury bond yield dipped to 6.54% on Wednesday from 6.58% Tuesday.
Traders said some investors also are betting that Germany’s central bank will cut short-term interest rates at a meeting today. That could stoke optimism about continued economic growth in Europe.
Among Wednesday’s highlights:
* In the tech sector, Motorola soared 5 1/8 to 75 5/8 and Seagate shot up 3 1/2 to 45, responding to their strong earnings reports.
Nasdaq-traded tech stocks up sharply included Intel, up 3 3/8 to 72 1/4; Microsoft, up 3 3/8 to 99 7/8; Dell, up 3 1/4 to 66 7/8; Oracle, up 1 7/8 to 40 7/8; Ascend Communications, up 2 3/8 to 57 1/2, and Parametric Technology, up 2 1/4 to 52 1/4.
* Many industrial issues also resurged, as investors bet on a stretched-out economic expansion. Alcoa jumped 2 1/8 to 55 7/8, Phelps Dodge soared 2 1/2 to 70 1/8, Kennametal gained 1 5/8 to 39 3/8 and Caterpillar rose 1 3/8 to 71 5/8.
Also, paper and lumber stocks, which were hit by profit-taking on Tuesday, rebounded. International Paper jumped 2 1/4 to 88 7/8 and Champion International added 1 7/8 to 58 1/8. Weyerhaeuser, which reported sharply higher earnings, gained 1 3/8 to 49 3/4.
* Bank stocks were boosted by news of yet another giant merger in the industry: the marriage of First Chicago and NBD Bancorp.
First Chicago added 7/8 to 61 1/2 and NBD gained 1 7/8 to 34 3/8. Other winners included Bank of Boston, up 3/4 to 38 5/8; First American, up 3/4 to 37; Bankers Trust, up 2 1/4 to 64 5/8; Integra Financial, up 2 to 53 1/2, and Chase Manhattan, up 1 5/8 to 50 3/8.
* On the downside, drug store chain Revco DS plunged 3 to 20 3/8 on market talk that brokerage Roulston Research cut the company’s earnings estimates and that brokerage Robertson-Humphrey plans to do the same, traders said. Revco said it sees strong financial performance.
* Despite the general tech rally, two small software companies sank after forecasting lower quarterly earnings. Compuware plummeted 7 3/4 to 22 3/4 and Xcellenet dropped 5 3/4 to 17.
In foreign trading, London’s Financial Times 100-share average closed 13.4 points off at 3,450.6, while Frankfurt’s 30-share DAX average dipped 2.81 points to 2,199.09.
In Tokyo, the Nikkei 225-share average ended up 17.55 at 16,605.74.
Mexico’s Bolsa index closed at 2,526.04, up 23.03 points, while in Canada the Toronto Stock Exchange’s 300-share index leaped 60.48 points to a record 4,710.31.
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Nasdaq Mania
The Nasdaq market of mostly smaller-company stocks has been soaring this year, let by technology shares. How specific industry stock indexes within Nasdaq have jumped since Dec. 31: Computer: 56.4% Composite: 31.5% Transport: 26.7% Bank: 25.7% Telecom: 21.3% Insurance: 14.9%
The Nasdaq Since Jan. 1
Weekly closes of the Nasdaq composite, except latest:
July: 988.63
Sources: Nasdaq, Bloomberg Business News
