FINANCIAL MARKETS : Tech Issues, Bonds Lead a Rebound
Renewed buying of technology stocks and a sharp decline in bond yields gave Wall Street a lift on Monday after last week’s slide.
The Dow Jones industrial average rose 27.12 points to 4,668.67, recouping part of last week’s 67.27-point decline. Trading was typically slow for a summer Monday, however.
The Dow was driven by shares of IBM, which shot up 3 7/8 to 107 1/2 as tech stocks in general enjoyed fresh demand.
In the bond market investors rushed into longer-term issues, pulling yields lower for the first time in eight trading sessions.
The 30-year Treasury bond yield sank to 6.88% from 6.97% on Friday.
Bond yields had been rising steadily since July 6--when the 30-year T-bond was at 6.50%--as an increasing number of investors have lost faith that the Federal Reserve Board will cut short-term interest rates again any time soon.
Indeed, several key Fed officials’ bullish comments about the economy last week helped push yields up and stocks down.
But the 7% level for the 30-year Treasury bond appears to be a point at which many investors become interested in buying again, traders say.
“When we get close to that psychological point the selling seems to dry up and the buying comes in,” said Fred Leiner, analyst at Prudential Securities in Chicago.
Yields also fell on shorter-term bonds on Monday. The five-year T-note yield, for example, dropped from 6.27% to 6.19%. Traders were encouraged by the demand, because the Treasury will auction new two-year notes today and new five-year notes on Wednesday.
Meanwhile, Wall Street bulls were enthused by tech stocks’ rebound. The Nasdaq composite index, heavily weighted with tech issues, soared 16.80 points to 978.57 on Monday.
The index had plunged a net 37.56 points last week after disappointing earnings reports from Intel and Apple Computer, among others, caused some investors to bail out of the high-flying stocks.
But on Monday buyers returned in droves. Intel surged 4 5/16 to 67 1/4 and Apple gained 1 5/8 to 45 3/8.
“Investors are sifting through the technology rubble and picking up stocks that are 20% lower than a week ago,” said Philip Orlando, senior vice president at First Capital Advisers. Intel, for example, remains well below its recent peak of 78 3/8.
“If people still have confidence in the fundamentals, and think the outlook is good, they’ll come back to these stocks,” said Andrew Pratt, money manager at the $875 million Montgomery Growth Fund in San Francisco.
Some analysts cautioned, though, that much slower trading volume on Monday could indicate just a temporary lull in profit-taking in the red-hot tech sector. New York Stock Exchange volume of 315 million shares was the slowest since July 14.
Nonetheless, winners topped losers by 14 to 8 on the NYSE and by 20 to 14 on Nasdaq.
Analysts said the market was buoyed in part by another batch of big takeover deals, including Gannett’s $1.7-billion offer for Multimedia Inc.
Among Monday’s highlights:
* Tech shares advancing strongly included Compaq, up 2 1/8 to 51; Sun Microsystems, up 4 to 45 3/4; Microsoft, up 1 5/8 to 93 5/8; Dell Computer, up 3 1/2 to 64; and Seagate, up 2 3/4 to 44.
Kulicke & Soffa, which makes semiconductor-manufacturing equipment, soared 7 to 86 1/2 after reporting stronger-than-expected quarterly earnings.
Also, Texas Instruments leaped 9 1/4 to 153, nearing its recent peak of 159. The company said it will offer a new class of memory computer chip that will greatly speed computer operations.
* Telecommunications issues rose with technology stocks. Nokia soared 4 1/8 to 68 1/2, Spectrian jumped 3 13/16 to 46, 3Com gained 2 1/2 to 72 5/8 and DSC Communications jumped 3 to 52 1/4.
* Many oil stocks rose in the wake of healthy quarterly earnings reports. Winners included Chevron, up 1 to 48; Unocal, up 1/2 to 27 3/4; and Royal Dutch Shell, up 2 5/8 to 126 1/8. Atlantic Richfield was unchanged at 115 1/2.
* Stone Container, the Big Board’s volume leader, gained 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.
* Ducommun soared 2 1/16 to 9 1/4 in heavy trading on the Amex after the Carson-based aerospace-component firm reported quarterly earnings of 20 cents a share, up 33%. The company said sales and earnings continue to benefit from recent acquisitions, as well as new program awards.
* On the downside, Capital Cities/ABC sank 3 7/8 to 97 3/4 after its earnings disappointed investors.
Some recently strong industrial stocks gave ground. Reynolds Metals lost 2 1/2 to 59 and Alcoa fell 7/8 to 54 1/8.
In foreign trading, Tokyo’s 225-share Nikkei index recovered from moderate losses to close at 16,591.50, up 2.41 points.
Mexico City’s Bolsa stock index gained 15.16 points to 2,485.40.
In commodities markets, gasoline prices shot up 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 futures 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.
