FINANCIAL MARKETS : Tech Issues, Bonds Lead a Rebound
Renewed fervor for technology stocks and a rebound in the bond market Monday enabled Wall Street to repair some of the damage done in last week’s selloff.
The Nasdaq Stock Market, where numerous technology issues are listed, was the day’s star performer. Its composite index climbed 16.80 points to 978.57, recouping a substantial portion of the loss suffered last week when investors shunned some recent favorites, including computer, software, semiconductor and related issues.
“Investors are sifting through the technology rubble and picking up technology stocks that are 20% lower than a week ago,” said Philip Orlando, senior vice president at First Capital Advisers.
Analysts said the market was also buoyed by a retreat in long-term bond interest rates. The yield on the Treasury’s 30-year bond sank to 6.88% from 6.97% on Friday.
The buying enthusiasm included most blue chips. The Dow Jones industrial average rose 27.12 points to end at 4,668.67. Broader market indicators also recovered. The New York Stock Exchange composite index rose 1.32 points to end at 297.99, and the Standard & Poor’s 500 rose 3.01 points to end at 556.63. Gainers outpaced losers by about 7 to 4 on the Big Board.
Despite all the sturdy gains, analysts were reserving judgment on where stocks might go over the next few weeks.
However, Don Hays, investment strategist at Wheat First-Butcher & Singer, said stocks could retrench for a while as the market digests the huge gains achieved during this year’s impressive advance.
“I don’t think you can make a statement that the consolidation mode isn’t in effect anymore,” he said.
Investors were finding bargains Monday, particularly in the tech group.
Beneficiaries of the hunting among the Big Board’s active issues included International Business Machines, up 3 7/8 to 107 1/2, Micron Technology, up 4 3/4 to 60, and Motorola, up 2 1/8 to 78 1/8. Prominent gainers among Nasdaq-listed tech stocks were Intel, up 3 11/16 to 66 5/8, Microsoft, up 1 to 93, and Sun Microsystems, up 4 to 45 3/4.
Strength in the tech group has been a main force behind Wall Street’s advance this year. Yet last week, confidence in the the group had begun to crack.
The market’s longer-term fate could hinge on perceptions about interest rates.
This year’s powerful rally in bonds has shown signs of fatigue recently because of concern that interest rates may not fall further, as had been widely assumed. Signs that the economy has already begun to revive suggest that the Fed need not reduce short-term rates further to stimulate growth.
Among market highlights:
* Bank of Boston rose 2 to 42 after merger plans with CoreStates Financial was scuttled.
* Capital Cities shed 3 7/8 to 97 3/4 after it reported second-quarter results below analysts’ expectations.
* Ducommun shares closed up almost 29%, hitting a 52-week high, after the company said its second-quarter earnings rose 43%. The Carson-based company’s shares closed up 2 1/16 at 9 1/4 on American Stock Exchange trading of 268,600, about 47 times its three-month daily average of 5,700. The aerospace component company said it benefited from recent acquisitions.
* Acme Electric shed 2 7/8 to 12 1/4 after tumbling 12 1/8 last week on news that its profit margins were under pressure because of rising material costs.
* Electroglas rose 6 3/4 to 72, and Kulicke & Soffa rose 7 to 86 1/2. Montgomery Securities raised its earnings estimates for the companies after each reported better-than-expected earnings on Friday.
* Stone Container, the Big Board’s volume leader, rose 1 5/8 to 22 1/8 after posting second-quarter income from operations of $1.42 a share, compared to a loss of 58 cents a share a year earlier.
In overseas trading, stocks moved ahead. Tokyo’s 225-share Nikkei average recovered from moderate losses during the day to close at 16,591.50, up 2.41 points, or 0.01%. Europe’s markets derived strength from Wall Street’s recovery, and share prices pushed higher in most of the major markets there.
The dollar fell against most major currencies Monday, but it did edge up against the German mark as inflation data suggested a potential easing of German interest rates. Lower rates in Germany would tend to diminish demand for marks and indirectly boost the dollar.
Preliminary inflation reports from two major German states showed moderate declines in the inflation rate. That led to expectations the central bank may lower rates when it returns from a summer break, either at its Aug. 10 meeting or later in the month, said David Gilmore, a partner at Foreign Exchange Analytics, a New York investment advisory concern.
In late New York trading, the dollar was quoted at 1.3853 German marks, just up from 1.3851 late Friday. The dollar also was changing hands in New York at 87.45 Japanese yen, down from 88.49.
Gasoline prices shot up Monday after an unexplained fire broke out at an Amoco refinery in Texas. The refinery, the nation’s largest, processes 433,000 barrels a day of crude oil. August gasoline jumped 1.21 cents to 53.26 cents a gallon on the New York Mercantile Exchange, recovering from Friday’s four-month low of 51.50 cents.
