FINANCIAL MARKETS : Smaller Stocks Take Lead as Market Powers Ahead
The 1995 bull market advanced again Thursday, led by shares of smaller companies.
The Russell 2,000 index of smaller stocks jumped 2.65 points, or 0.9%, to a record 298.75, its second straight new high.
Meanwhile, the blue-chip Dow Jones industrial average gained 25.71 points, or 0.6%, to 4,732.77, just short of its record 4,736.29 set July 17.
Advancing issues led decliners by about 7 to 4 the New York Stock Exchange and by 21 to 16 on Nasdaq in active trading.
While the Dow remained below its all-time high, the NYSE composite index rose 1.86 points to a record 302.13, and the Standard & Poor’s 500 index added 3.61 points to 565.22, also a record.
The Nasdaq composite index, heavily weighted with technology stocks, climbed 10.48 points to 1,010.66, topping its previous record of 1,005.89.
Analysts said investors’ appetite for stocks remains unsated and that last week’s two-day selloff--fueled by a jump in bond yields and some disappointing corporate earnings reports--merely gave more buyers an excuse to jump in.
Last week’s market rout is turning out to be “nothing but a sneeze,” said Edward Collins, head stock trader at Daiwa Securities America.
“If you panicked last week and sold, you feel foolish because you can’t get back into your position,” said Timothy Strauss, manager of institutional sales at Hancock Institutional Services.
On Thursday, the market was buoyed by healthy earnings reports, more takeover announcements and a modest decline in bond yields.
“Earnings continue to be positive,” said John Church, chief investment officer of Glenmede Trust Co. in Philadelphia. “The economy looks like it’s going toward the best case of soft landing or no landing. It’s continued growth without inflation. The Federal Reserve has done its job in keeping interest rates in line, and stock valuations aren’t too high. All of that adds up to a very powerful market.”
Stock and bond markets, as well as the dollar, rallied at the opening after the Commerce Department said orders to manufacturers for expensive items eased 0.1% in June. The data indicates continued moderate economic growth.
The yield on the 30-year Treasury bond slipped to 6.83% by the close, down from 6.88% on Wednesday. Shorter-term yields also fell.
Financial markets also may have been helped by a slide in gold prices. The near-term futures price fell $3.20 to $383.90 on the Comex in New York.
Traders said the recent surge in small-company stocks, in particular, shows that the bull market is broadening rather than narrowing. The Dow stocks had led the rally in the first half of the year, but smaller issues are now taking charge.
Among Thursday’s highlights:
* Many technology stocks, this year’s market stars, were pushed higher again. A merger announcement between 3Com and Chipcom, two firms involved in computer networking, helped drive the rally.
Chipcom soared 7 1/2 to 37 1/4 while 3Com lost 2 1/8 to 73 1/2.
Other tech issues advancing included Adobe Systems, up 1 7/8 to 65 3/8; Cabletron Systems, up 2 to 58 1/2; IBM, up 1 3/4 to 110 3/4; Read-Rite, up 2 3/4 to 40 1/4, and Parametric, up 2 1/8 to 57 5/8.
* Quarterdeck, a Santa Monica software firm, jumped 2 5/8 to 14 7/8 after announcing plans to acquire Internetware Inc., a developer and marketer of server-based Internet access solutions.
* Biotech stocks continued to rise in the wake of Amgen’s announcement of positive tests of its anti-obesity protein on mice. Amgen gained 2 3/8 to 86 5/8. Also rising were Biogen, up 1 5/8 to 46 5/8 after reporting earnings, and Genzyme, up 3 to 48 1/2, also on an earnings report.
* Many defense stocks advanced. Boeing jumped 2 1/8 to 67 1/2, Lockheed Martin surged 2 7/8 to 64 7/8, Logicon gained 1 3/4 to 51 1/4 and McDonnell Douglas rose 2 15/16 to 83.
* Airline stocks rose in sympathy with Delta Air Lines, whose shares climbed 1 1/8 to 80 1/2. Delta said its fourth-quarter net income was $4.49 per share, contrasted with a loss of $5.50, including a special charge, a year ago.
Analysts had been expecting Delta’s earnings to be about $3 per share at most.
* Union Pacific rose 1 1/2 to 62 7/8. The rail giant’s board approved a spinoff public offering of Union Pacific Resources common stock.
* On the downside, surgical device maker U.S. Surgical fell 2 7/8 to 23 7/8 after Morgan Stanley downgraded the stock.
* Benson Eyecare slumped 1 5/8 to 8 1/2 on a disappointing earnings report.
In foreign trading, Mexico City’s Bolsa index added 19.57 points to 2,398.78 after Wednesday’s steep slide. In commodities trading, coffee prices changed course and turned abruptly lower as doubts began to emerge about the ability of producing nations to hold the line on exports.
Prices fell back to the levels at which they traded before the producing nations initialed a pact to limit exports in an effort to boost sagging global prices.
September coffee futures fell 4.7 cents to 147.6 cents a pound in New York.
