FINANCIAL MARKETS : Dow Up 14.82 on News of Mexico Stock Gains
Wall Street stocks rose Monday, buoyed by sharp gains in technology shares. Uncertainty over Quebec’s sovereignty vote kept some investors wary, although the fears were offset by news of Mexico’s new economic pact, which sent Mexican shares soaring.
The Dow Jones industrial average ended up 14.82 points at 4,756.57. In the broader market, advancing issues led declines 1,274 to 973 on moderate volume of 318 million shares on the New York Stock Exchange.
Analysts said the referendum in Quebec kept a lid on trading, but most doubted that a separatist victory would bring a sharp market reaction in the United States. Bond yields hardly budged and the dollar edged up slightly against most currencies.
Mexican stocks soared and the peso rose for a second day after the government unveiled a series of corporate tax breaks aimed at boosting economic growth and company earnings.
The stock market index rose 4.57% to 2348.64 after the peso strengthened 2% to 14.44 cents each, from 14.15 cents on Friday.
It was the Bolsa index’s biggest single-session rise since a 5.58% increase on July 5.
U.S. investors turned bullish on technology stocks, which sold off early last week and began to rebound Friday. The Morgan Stanley High Tech Index of 35 stocks surged 10.22 to a record 348.1, surpassing its Sept. 11 high, while the technology-laden Nasdaq Composite Index climbed 14.14 to 1039.69. The Russell 2000 Index rose 1.69 to 296.24, snapping seven straight losses.
Reports last week of unexpectedly strong orders for durable goods and third-quarter economic growth brightened the business outlook for technology companies, analysts said.
“The earnings estimates and the profit figures that are being discussed for 1996 are too low if you have that much growth,” said Tracy Herrick, chief investment strategist at Jefferies & Co. in Palo Alto, Calif.
Leading the way were International Business Machines Corp., which rose 1 3/4 to 98 1/4, Microsoft Corp., up 2 3/4 to 102 3/4 and Intel Corp., up 2 to 69 3/4. Novell Inc. said it was in talks to sell its business applications software division. Its stock rose 1 1/2 to 16 3/8.
To be sure, some skeptics believe overall gains in share prices could prove short-lived.
“We’re still in a fairly uncertain period here, and that’s going to keep a ceiling on how far the market can go,” said James Solloway, director of research at Argus Research.
“Earnings are slowing even though the economy has been chugging along,” he said. Because last year’s fourth quarter was so strong, he added, “the comparisons will only get tougher from here on in.”
Although after-tax profits have surged this year among Standard & Poor’s 500 companies, Commerce Department statistics show that for the economy as a whole, profits this year are almost unchanged from last year’s, he said.
Among market highlights:
* RJR Nabisco Holdings rose 3/4 to 30 3/4 after Brooke Group Ltd. said it and investor Carl Ichan have acquired almost 5% of RJR and will launch a proxy fight to force a spin-off of its Nabisco unit. Brooke Group gained 1 5/8 to 8 1/2.
* Softkey International tumbled 6 to 32 1/8 after it made a hostile offer for most of the shares of Learning Co., which ended up 4 7/8 at 60 3/8. Software maker Softkey said it also will acquire Minnesota Educational Computing Corp. in a tax-free stock-swap deal valued at $370 million.
Minnesota Education jumped 10 to 31 1/4. Meanwhile, Edmark Corp., rose 2 5/8 to 46 1/8 on news of Softkey’s bids for two of its rivals.
* The Dow transportation average rose 24.31, or 1.28%, to 1,928.55. It was led by Burlington Northern Sante Fe, up 1 7/8 to 82 1/2, and Delta Air Lines, up 5/8 to 65 3/8.
* Oil-service stocks rose after NatWest upgraded a number of them, including Schlumberger, up 1 5/8 to 61 1/8; Halliburton, up 2 1/4 to 43; Baker Hughes, up 3/4 to 19 1/2.
Overseas stocks markets were higher. The FTSE-100 index in Britain, the world’s third-largest stock market, gained 0.35%, France’s CAC 40 surged 3.04% and Germany’s DAX Index rose 2.39%t. Japan’s Nikkei 225 Index advanced 0.99%.
Soybean prices surged Monday on rumors that China is actively buying U.S. soybeans and soy products, which would explain a sharp jump in weekly soybean exports reported by the Agriculture Department.
The government said 32.3 million bushels of soybeans were inspected for export last week.
“It was really shocking, double what they were thinking it would be,” said Ron Kucha of O’Connor and Co. Talk that China had purchased between 800,000 and 1 million metric tons over the past few weeks propelled the market, with November soybeans climbing 6.75 cents to $6.70 1/4 a bushel.
“The Chinese rumors are still going around, but we haven’t been able to confirm any of it,” said Mark Cermak of O’Connor and Co.
