FINANCIAL MARKETS : Technology Issues Pace Strong Rally
More records were broken on Wall Street on Wednesday as investors continued to snap up economically sensitive cyclical stocks and technology issues.
Traders appeared optimistic that the Federal Reserve Board will lower interest rates later this month, which would spur the economy--and corporate profits. Technology issues paced the advance. The Dow Jones industrial average rose 13.73 points to about 4,683.81, its fourth consecutive trading day of gains. Advances outpaced declines, 1,286 to 905, on volume of 370 million shares on the New York Stock Exchange.
The Nasdaq Composite index, heavily weighted with technology issues, rose 4.98 points to 1,044.28, surpassing the record close of 1,039.30 on Tuesday, when it soared nearly 20 points.
The Standard & Poor’s composite index of 500 stocks and the NYSE Composite index also scored back-to-back all-time closing highs.
“The sell on the news play is over,” said one market watcher, referring to recent weakness in technology shares in the wake of Microsoft Corp.’s Windows 95 launch. “The buyers are back to Nasdaq. The long-term value of techs is undeniable but the blips will always be there.”
Phil Orlando, a senior vice president at First Capital Advisers, said the tech group was “significantly undervalued” since it had corrected 20% versus the overall market’s 4% pullback from mid-July to early August.
Micron soared 6 to 87 1/4 after rising 4 7/8 on Tuesday. Goldman Sachs and SoundView hiked their fiscal 1996 and 1997 earnings estimates on the company and raised price targets.
High technology stocks also got a boost from two merger announcements. Xylogics surged 11 7/8, or 32%, to 48 7/8 after Bay Networks said it will acquire Xylogics in a stock swap valued at $330 million. Bay Networks lost 1 3/8 to 48 7/8. Megatest soared 8, or 33%, to 32 1/4 after Teradyne and Megatest agreed to merge in a stock deal. Teradyne slipped 1/8 to 39 1/2.
IBM, however, closed down 1/2 at 100 5/8.
Kenneth Ducey of BT Brokerage said the market’s climb to record ground “continues to baffle everyone” but noted “new cash is coming into the market with the start of the month.”
Marty Kearney, at trader at PTI Securities, said Wednesday’s buying was “cautious and people are hedging their investments.”
Among market highlights:
* USAir added to Tuesday’s gains, rising 1 to 10 5/8. It rose 1 1/2 Tuesday after the company forecast a third-quarter pretax profit versus Wall Street expectations of a loss.
* Applied Innovation tumbled 7, or 28%, to 17 3/4 after it forecast unexpected lower third-quarter revenues.
* Netscape jumped 2 1/2 to 48 3/4. Morgan Stanley started coverage of the stock with an outperform and Hambrecht & Quist started coverage with a buy, market sources said.
* Owens-Corning added 3 3/4 to 43 3/4 after news of a favorable settlement with one of its major insurers for non-products insurance coverage for asbestos.
* National Semiconductor added 2 1/4 to 32 1/8. The company reported higher first-quarter earnings and said orders for the quarter jumped 25%.
* The 30 Dow industrial components were led higher by Eastman Kodak, which rose 2 to 59 3/4. Danka Business Systems agreed to sell Kodak’s high-volume copiers throughout the United States.
But shares of J.P. Morgan, another Dow industrial component, fell 1 5/8 to 73 5/8 after the Wall Street Journal reported that insiders were selling the bank’s stock.
Stocks got help from the dollar, which rose against the yen and the mark after Germany cut interest rates and the Bank of Japan intervened in currency markets. The dollar traded late in New York at 98.96 yen, up 0.01 yen, and 1.4787 marks, up 0.0013 marks.
The Nikkei index in Tokyo lost 0.98%, and the Paris CAC index lost 0.93%. But the FT-SE 100 index in London rose 0.72% to a record high close, and the DAX index in Frankfurt added 0.54%.
Cotton prices plummeted for the second consecutive day Wednesday as traders took profits off a recent rally based largely on fears of insect problems afflicting the U.S. crop. Prices dropped the maximum 2-cent limit, whittling away the market’s 14-cent climb since mid-August. October fell to 82.42 cents a pound at the New York Cotton Exchange.
Meanwhile, overseas stock markets were mixed.
