FINANCIAL MARKETS : Dow Rally Eases Fears of Slump
Investors stampeded back to Wall Street on Tuesday, recouping losses from last week’s selloff as technology stocks jumped and blue-chip companies posted positive earnings surprises.
An impressive performance by the Dow Jones industrial average--on top of Monday’s solid increase of 27.12 points--eased fears that last week’s setback on Wall Street was the start of a serious slump. The popular gauge rose 45.78 points to 4,714.45. With Monday’s gain, the index erased last week’s 67-point drop.
Buyers concentrated on semiconductor, software, computer and related issues, which boosted the Nasdaq Stock Market. Nasdaq’s composite index surged 15.18 points to 993.75.
But the buying wasn’t confined to the tech group. Market measures for an array of issues also moved ahead. The New York Stock Exchange composite advanced 1.93 points to 299.92 and Standard & Poor’s 500 rose 4.47 points to 561.10.
In the broader market, advancing issues led decliners 1,340 to 925 on active trading of 373 million shares on the New York Stock Exchange.
“There is no fear in this market,” said William Bayer, a vice president at PTI Securities.
Analysts said stocks were also boosted by a drop in long-term bond interest rates for the second day in a row.
Reuters quoted a source close to the Federal Reserve Board as saying that the central bank is concerned about the economy but that inflation remains the main guidepost for its monetary policy.
In the bond market, the yield on the benchmark 30-year Treasury bond fell to 6.82% from 6.87% on Monday. It stood at 6.97% on Friday.
“After last week’s scare, the stock market is now simply scaring shorts instead of scaring longs,” said Thom Brown, managing director of Rutherford Brown & Catherwood.
The stock market was rocked last week by heavy selling as Wall Street took profits from the dizzying rally in high-technology stocks. Traders also worried that corporate profits may have hit a peak.
In Tuesday’s session, Dow index components that posted strong quarterly results included Goodyear, up 1 1/4 to 44, and American Express, up 1 3/4 to 37 7/8.
Boeing rose 2 1/4 to 66 on news that it received an order from International Lease Financial Corp. for 54 Boeing 737 jetliners valued at $2.25 billion. It also reported its first quarterly net loss--$231 million--in more than 25 years after a one-time, $600-million charge for retirement incentives to slash about 9,500 jobs.
UAL, parent of United Airlines, rose 4 to 149 1/2 after it posted earnings that beat analysts’ expectations.
“This is really an earnings-driven market,” Brown said. “The market is selling off in companies that are not reporting as good earnings or those that are less than expected.”
“And the ones with earnings disappointments in recent weeks are bouncing back a bit,” he said.
IBES, a Wall Street firm that tracks corporate earnings, said that of the 293 companies in the Standard & Poor’s 500 index that have reported quarterly results so far, 177 have posted unexpected positive earnings while 83 have reported negative earnings surprises and 33 were on target.
Analysts said sentiment was upbeat after the National Assn. of Realtors reported that June sales of existing homes jumped 6.5% to an annual rate of 3.78 million. This was above the 3.65 million forecast in a Reuters survey.
In another report, the Conference Board said consumer confidence rose to a higher-than-expected 99.9 in July from the prior month’s revised 94.6 reading.
Among market highlights:
* IBM rose 7/8 to 108 3/8 after topping $110 intraday for the first time in four years. But Philip Morris, another Dow index component, shed 3/4 to 73 7/8 on news that a federal investigation wants to determine whether the company kept secret the results of studies on the effects of nicotine.
* Among technology shares, Intel rose 1 3/4 to 69. Oppenheimer & Co. upgraded the stock. Microsoft gained 2 3/4 to 96 3/8.
* Strong second-quarter results from Chubb Corp. and a few other U.S. insurers bolstered sentiment toward the group and drove their stock prices higher. Chubb was up 2 1/8 to 80 5/8, American International Group rose 2 1/2 to 110 and TIG Holdings was up 1 3/8 to 24 1/8.
* German shares, hitting a 14-month high during the session, closed floor trade with broad gains in the wake of Monday’s late-session rally. Hopes for another Bundesbank rate cut, triggered by softer inflation data, had helped the blue-chip 30-share DAX index soar to a high of 2,234.21. The index closed trading 31.58 points higher at 2,229.06.
Tokyo stocks ended sharply lower. The 225-share Nikkei average shed 443.10 points to end at 16,148.40.
Renewed concerns about hot weather drove up corn and soybean prices. August soybeans rose 4.75 cents to $6.30 1/4 a bushel and September corn gained 3 cents to $2.96.
