FINANCIAL MARKETS : Nasdaq Rides Tech Stocks Through the 1,000 Barrier : Markets: The Dow industrials also move into record territory despite some concerns on the inflation front.
Boosted by a continued surge in technology stocks, the Nasdaq composite index on Monday closed above 1,000 points for the first time, a significant milestone that shows how much millions of small investors have gained from the current bull market rally.
Blue-chip stocks also climbed again into record territory Monday, as merger news involving big-name companies plus several favorably received corporate profit reports stoked buying interest in stocks and offset the negative impact of sharply higher bond yields.
After overcoming initial weakness, the Dow Jones industrial average climbed 27.47 points to 4,736.29, surpassing the previous peak of 4,727.48 reached just last Thursday.
The Nasdaq stock market’s composite index, which is heavy on computer industry stocks, rose 6.56 points to 1,005.89 on Monday. Barely a month ago, the index first crossed 900.
Driving the Nasdaq rally is a powerful surge of investor demand for shares of semiconductor, software, computer and related companies, which are reporting healthy earnings in a historically difficult second quarter. Twice last week, the Nasdaq market set records for heavy trading volume.
The Nasdaq composite index has risen by nearly a third so far this year, compared to about 22% for the more broadly based Standard & Poor’s 500 list.
“It’s certainly symbolic, because of the [market’s] tendency to hesitate around a round number,” said Greg Nie, chief technical analyst at Kemper Securities.
However, the bull market rally in technology stocks may be hard to sustain much longer, he said.
“You’ve tacked on another hundred points in an awfully short period of time,” he said. “It is beginning to run the risk of . . . ‘How are you going to maintain this pace?’ ”
The composite index, a measure of about 5,000 company stocks traded on the Nasdaq, was created in 1971 and began at 100. It took more than 20 years to reach the 500 level, then shot up above 1,000 in just over four years.
Fueling the rally in high-tech shares was Microsoft, which said late Friday that the final code for its Windows 95 operating system was sent to manufacturers, putting to rest rumors of further delays in the program. Microsoft leaped 5 3/8 to 109.
A jump of 3 5/8 to 107 1/2 in International Business Machines, which is expected today to announce a strong second-quarter profit, also helped boost the Dow.
With the earnings season in full swing and the rally in tech stocks continuing, investors were able to overlook concerns about the direction of interest rates.
Treasury bond yields shot higher Monday in a setback for the bond market, sparked by fears that the 6-month-old bond rally is faltering.
Market analysts tied the bond price drop to several factors, including sharply higher daily commodity prices that spurred fears of rising inflation.
The yield on the benchmark 30-year bond rose to 6.67% from 6.60%. Its price, which moves in the opposite direction, dropped 1 1/16 points, or $10.63 per $1,000 in face value.
Among Monday’s highlights:
* Kimberly-Clark soared 4 7/8 to 63 1/2, responding to the announcement that the big consumer products company is buying Scott Paper in a $6.8-billion stock deal. Scott fell 2 3/4 to 46 3/8 amid disappointment that the deal wasn’t worth more.
* Among other technology stocks, Intel rose 15/16 to 76 7/16 and Oracle was up 1 7/16 to 42 1/4.
* Not all tech stocks took part in the rally. Quantum, which said its earnings for the latest quarter would be significantly lower than a year earlier, fell 3 to 22 5/8.
* Travelers Group gained 1 3/4 to 47 1/8 after reporting a second-quarter profit that was well above Wall Street expectations.
* Times Mirror Class A shares rose 2 7/8 to 26 5/8. The company discontinued publishing its New York Newsday paper and said it will have a third-quarter restructuring charge due to the move. The stock’s investment rating was raised by Morgan Stanley.
* L.A. Gear fell 7/8 to 3 1/4. The footwear and apparel company reported a second-quarter loss of 34 cents a share, compared with a deficit of 59 cents a year earlier.
Overseas markets posted gains. Tokyo’s 225-share Nikkei average swelled 324.77 points to close at 16,842.47, while Frankfurt’s 30-share DAX average rose 14.71 points to 2,199.61. In London, the FTSE-100 average ended at 3,442.6, up 13.4 points.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Batting Over 1,000
The Nasdaq composite index, a market value-weighted measure of all issues in the Nasdaq stock market, reached a milestone Monday. The index has risen dramatically in the past five years, in part reflecting the rapid growth in exchange’s technology stocks.
NASDAQ 1971-1994
Year-end closes, except latest:
Low: 59.82
Monday: 1,005.89
Weight in Nasdaq composite index
The largest dozen Nasdaq companies make up more than 20% of the index, due to their large market capitalization.
Company / % of index Microsoft: 5.31% Intel: 5.28% Oracle: 1.74% Cisco Systems: 1.36% TCI: 1.26% MCI: 1.20% Amgen: 1.06% Applied Materials: 0.72% Novell: 0.71% LIN Broadcasting: 0.65% Apple Computer: 0.56% DSC Comm.: 0.55% Total: 20.40%
