FINANCIAL MARKETS : Stocks Rally Briskly on Bargain Hunting
Investors poured back into the stock market Thursday, snapping up many issues beaten down in recent profit taking.
Technology stocks led the rally, but the buying was widespread as Wall Street neared the end of the third quarter. Insurance, industrial and biotechnology stocks were particularly hot.
“Anything that has been crushed down . . . we’ve seen get a little upside play in the last two days,” said Thom Brown, market strategist at Rutherford Brown & Catherwood.
The Dow Jones industrial average gained 25.29 points to 4,787.64, nearing its record of 4,801.80 set on Sept. 14.
In the broad market, advancing issues led decliners 1,467 to 806 on the New York Stock Exchange, on moderately active volume of 368 million shares.
The Nasdaq market, home to many technology issues, saw heavy buying. The Nasdaq composite index leaped 20.51 points or 2% to 1,047.05, closing in on its recent peak of 1,067.40.
Analysts said the buying partly reflected end-of-quarter portfolio jockeying by money managers. Some managers who were taking profits in technology stocks earlier in the week returned to load up on other tech shares on Thursday.
At the same time, drug and food stocks that had displaced technology as market leaders in recent weeks were hit by their own profit-taking wave.
Market strength recently has been rotating among different stock groups, “like an orchestra with one segment playing while the other’s quiet,” said Peter Canoni, managing director for equity investments at Aeltus Investment Management.
Both stock and bond markets had been hammered early Wednesday after the government reported some stronger-than-expected economic data, raising fears of higher interest rates ahead. But buyers returned later in the day, and markets closed with fairly minor losses.
On Thursday, bond yields edged up again after the government reported that the number of applications for first-time jobless benefits fell by 31,000 last week to 335,000, a surprisingly big drop that hinted at economic strength.
But many economists argue that there is little chance that business activity will reheat significantly this year. And for now, bond investors seem to be concurring.
The yield on the 30-year Treasury bond edged up modestly to 6.58% on Thursday from 6.57% on Wednesday. Shorter-term yields also were up slightly.
Bonds seem relatively undisturbed by another decline in the dollar’s value. The dollar edged lower against most major currencies as traders bought German marks amid concerns about political turmoil in Europe.
The dollar fell to 1.4218 German marks from 1.4243 Wednesday, and to 99.35 Japanese yen from 100.46 yen Wednesday.
Early today in Tokyo the dollar slumped further, to 98.37 yen.
Among Thursday’s highlights:
* Technology stocks soared as buyers returned. Many analysts say that tech companies, on balance, should show hefty earnings growth when third-quarter results are released in the next few weeks.
A string of disappointing earnings warnings from some key firms had helped spark the group’s recent selloff.
On Thursday, Micron Technology soared 4 1/8 to 82 5/8, Intel climbed 2 9/16 to 61 7/8, Xerox rose 3 1/4 to 133 3/4, Compaq zoomed 3 1/8 to 49 5/8, Sun Microsystems leaped 5 11/16 to 64 1/16 and Microsoft jumped 2 7/8 to 91 1/2.
Among initial stock offerings, Internet business software maker Checkfree sold 6.5 million shares at 18 each and rose to close at 21 1/2 on Nasdaq.
* Biotech issues also were hot. Biogen jumped 2 1/4 to 61, Genzyme soared 3 to 59 1/8, Agouron Pharmaceuticals rocketed 4 1/2 to 28 1/4 and Immunex gained 3/4 to 13 3/4.
* Industrial stocks rebounding included Dover, up 1 1/4 to 37 3/8; B.F. Goodrich, up 1 1/4 to 63 5/8; Eastman Kodak, up 1 3/8 to 59 1/2; and Caterpillar, up 1 3/8 to 57 1/2.
* Aetna Life & Casualty jumped 2 3/8 to 74 3/8 on rumors that it may spin off of its property-casualty unit. Other insurance giants also rose. Cigna soared 6 1/8 to 105 7/8, Chubb gained 1 3/8 to 96 7/8 and American International Group leaped 2 1/8 to 86 1/2.
* On the down side, recently hot drug and food stocks suffered some selling. Eli Lilly lost 1 1/4 to 90 5/8, Merck eased 1/2 to 56 3/8 and Coca-Cola fell 1 3/8 to 68 3/4.
In Mexico City, stocks rebounded to close higher on bargain hunting and following fresh gains in the peso, ending a run of brutal losses.
The key Bolsa index of 37 leading shares jumped 38.43 points to 2,381.49. Turnover was high at 125.7 million shares.
The Bolsa had plunged nearly 3% Wednesday, bringing the total losses from a four-day losing streak to more than 9%.
The peso, whose weakness recently had caused Mexican interest rates to rise, closed 5.75 centavos stronger at 6.39 per dollar amid profit taking by dollar investors.
Overseas, London’s FTSE-100 index of top British stocks closed down 6.0 points at 3,479.0. In Tokyo, the Nikkei 225-share average ended the day down 239.57 points at 18,022.86.
In U.S. commodities trading, wheat prices soared on strong demand for exports and tight world supplies.
Morocco, a major importer, bought 550,000 metric tons of wheat after the market closed on Wednesday, including 180,000 tons of U.S. wheat. That pushed prices higher in Chicago, Kansas City and Minneapolis wheat futures markets from Thursday’s opening bell.
