FINANCIAL MARKETS : Blue Chips Rally on Tech Bargain Hunting
Blue-chip stocks rallied Thursday as investors sought bargains in recently battered technology shares, while bond yields edged up on a surprisingly big drop in weekly U.S. jobless claims.
The dollar edged lower against most major currencies as traders bought German marks amid concerns about developments in Europe.
The Dow Jones industrial average ended up 25.29 points at 4,787.64, extending its recovery from Wednesday’s midafternoon selloff of more than 50 points, though that was cut to a few points by Wednesday’s close.
In the broader market, advancing issues led decliners 1,441 to 761 on moderately active trading of more than 367 million shares on the New York Stock Exchange.
The Nasdaq composite index, heavily weighted with technology stocks, climbed 20.51 points, or 2%, to 1,047.05.
“Anything that has been crushed down, such as several of the tech stocks, we’ve seen get a little upside play in the last two days,” said Thom Brown, market strategist at Rutherford Brown & Catherwood.
Conversely, he said, stocks that had a good run-up, such as the pharmaceuticals, have been subject to profit taking.
Analysts said the market has been under pressure this week as Wall Street showed disappointment at the Federal Reserve Board’s decision Tuesday to keep interest rates unchanged amid signs the economy is growing.
The technology stocks took the brunt of the selling, with portfolio managers locking in profits before the third quarter ends.
“Today is a recovery from yesterday, which is being led with a bounce in the technology sector,” Hugh Johnson, chief investment officer at First Albany Corp., said of Thursday’s and Wednesday’s stock action.
The bond market fell after the government reported fresh evidence Thursday of economic strength with the number of applications for first-time jobless benefits falling by 31,000 last week to 335,000, a surprisingly big drop.
On Wednesday, the market was stunned by news that orders for costly manufactured goods had climbed during August at the sharpest rate in a year. That report prompted a leap in long-term bond interest rates.
The yield of the key 30-year Treasury bond edged up to 6.58% on Thursday from 6.57% at Wednesday’s close.
In late New York trading, the dollar was at 1.4218 German marks, down from 1.4243 marks late Wednesday.
The dollar ended at 99.35 Japanese yen, down from 100.46 yen Wednesday.
In Thursday’s highlights:
* Among the big movers in technology stocks, Micron Technology climbed 4 1/8 to 82 5/8 as investors bid up computer chip stocks. Intel climbed 2 9/16 to 61 7/8.
* Compaq Computer rose 3 1/8 to 49 5/8. The company said it started shipping its LTE 5000 notebook computer into the retail market within the last week. Traders also said a Bear Stearns analyst made positive comments about Compaq.
* Aetna Life & Casualty jumped 2 3/8 to 74 3/8 on rumors of a spinoff of its property-casualty unit. The company declined comment.
* Checkfree rose 3 1/2 to 21 1/2 on its first day of trading. The initial public offering for 6.5 million shares was priced at $18 a share, and more than 5.6 million shares were traded.
* Cigna soared 6 1/8 to 105 7/8, but a company spokesman said Cigna knew of no reason for the rise.
* Fleming fell 3 5/8 to 24 after the wholesale food retailer said that third quarter, fourth quarter and full year earnings will fall short of analysts’ estimates.
* Among pharmaceuticals, American Home Products fell 1/2 to 85 5/8 and Eli Lilly lost 1 1/4 to 90 5/8.
The Standard & Poor’s composite index of 500 stocks rose 4.83 points to 585.87. The American Stock Exchange index was up 3.63 points to 544.28.
The NYSE Composite index of all listed common stocks rose 1.97 points to 313.29. The average share was up 24 cents.
In 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.
Wheat for December delivery rose 3 3/4 cents to close at $4.84 1/4 a bushel at the Chicago Board of Trade. The July, 1996, contract for the first soft red winter wheat to be harvested next summer hit a new high at $4.13, up 5 1/4 cents.
At the New York Mercantile Exchange, energy futures ended higher again, led by gains in gasoline. October gasoline ended up 1.5 cents at 56.05 cents a gallon, October heating oil added 0.48 cent to 49.50 cents a gallon, and November crude oil closed up 19 cents at $17.76 a barrel.
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.
Mexican stocks rebounded to close sharply higher on bargain hunting and following 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 peso closed 5.75 centavos stronger at 6.39 per dollar amid profit taking by dollar investors.
The stock market had plunged nearly 3% Wednesday, bringing the total losses from a four-day losing streak to more than 9%.
