FINANCIAL MARKETS : Dow Adds to Gains; Mexican Shares Rocket
The U.S. stock market on Monday added to Friday’s rally, as rebounding technology shares offset another decline in many financial issues.
Wall Street was also buoyed by a surge in battered Mexican stocks, after the Mexican government unveiled a plan to boost economic growth in 1996. The Bolsa stock index rocketed 4.6%.
The Dow Jones industrial average, which jumped 37.93 points Friday, rose 14.82 points to 4,756.57. The broader market was considerably healthier Monday, with winners topping losers by 13 to 10 on the Big Board.
In another measure of the broad market’s strength, the Russell 2,000 index of smaller stocks rose 1.69 points to 296.24, ending a seven-session losing streak.
The day was carried by technology stocks, which had been hammered in recent weeks by profit taking. The Nasdaq composite index leaped 14.14 points, or 1.4%, to 1,039.69, as some key technology stocks rose to record highs.
Morgan Stanley’s index of 35 high-tech stocks gained 10.22 points to a record 348.1, topping its previous peak reached Sept. 11.
Reports late last week of unexpectedly strong orders for durable goods and faster-than-expected third-quarter economic growth have encouraged fresh buying of tech issues, on the hope that the companies’ earnings will continue to advance briskly, analysts say.
That sentiment also boosted some industrial issues Monday.
“Earnings estimates and profit figures that are being discussed for 1996 are too low if you have that much growth” implied by recent data, said Tracy Herrick, investment strategist at Jefferies & Co.
But many economists argue that the third-quarter growth report overstated activity and that corporate earnings growth overall is almost sure to slow in 1996.
“Earnings are slowing even though the economy has been chugging along,” said James Solloway, director of research at Argus Research. Because last year’s fourth quarter was so strong, he added, “the comparisons will only get tougher from here on in.”
In a fresh report Monday, the government reported that consumer spending slowed in September.
For its part, the bond market continues to be fairly unruffled by economic data, and that may be helping stocks, experts say.
Bond yields fell Friday despite the strong third-quarter growth report. And on Monday the 30-year Treasury bond yield held steady at 6.35%. Shorter-term yields also were mostly unchanged.
In Mexico, meanwhile, stocks surged after the government, with the support of business and labor leaders, presented a new economic development plan, or pacto , which seeks to end the country’s worst recession since 1986.
The blueprint hopes to promote growth and control inflation through tight government spending, tax breaks for investment, higher minimum wages for workers and higher gasoline and electricity rates for everyone.
In response, the Bolsa stock index zoomed 102.72 points, or 4.6%, to 2,348.64. The peso strengthened 2% against the dollar.
It was the Bolsa’s biggest single-session rise since July 5.
Among Monday’s highlights:
* Tech issues leading the U.S. market higher included Intel, up 2 to 69 3/4; Adobe Systems, up 4 to 58 1/4; Hewlett-Packard, up 3 5/8 to a record 96; Micron Technology, up 2 7/8 to 72 1/2; IBM, up 1 3/4 to 98 1/4, and Computer Sciences, up 2 to 68 1/4.
Among Internet-related issues, Uunet gained 4 1/2 to 52, Netscape soared 7 to 88 1/2 and America Online rose 5 1/8 to 79 3/8.
* Industrial shares rallying included Alcoa, up 2 3/8 to 51 5/8; 3M, up 7/8 to 56 3/8; Dover, up 1 5/8 to 39 1/8; Owens-Corning, up 1 3/8 to 42 3/4, and Acme-Cleveland, up 1 3/8 to 21 3/4.
* Oil and oil-service stocks were also strong. Exxon rose 1 3/8 to 76, Halliburton leaped 2 1/4 to 43 and Unocal added 1 to 25 7/8.
* On the downside, many financial issues continued to weaken on worries about interest rates and about potential losses as consumer-loan delinquency rates rise.
NationsBank fell 1 1/2 to 66, Chemical Banking eased 1/2 to 57 7/8, Wachovia dropped 1 7/8 to 44 3/4 and BankAmerica sank 1 3/4 to 58 1/4.
* Mining firm Asarco added 3/8 to 31. After the market closed, Idaho-based potato mogul J.R. Simplot said he has purchased 5.2% of Asarco’s stock for investment purposes.
Overseas stock markets were mostly higher as the dollar continued to stabilize. In Paris, the CAC-40 stock index jumped 3%; Frankfurt’s DAX index rose 2.4%.
In U.S. commodities trading, soybean prices surged 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 U.S. Department of Agriculture.
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 & Co. In Chicago, November soybean futures climbed 6.75 cents to $6.70 1/4 a bushel.
