FINANCIAL MARKETS : Bond Rally Pushes Dow Up 55.64 to 53rd High of Year
Blue-chip stocks soared Wednesday on the heels of another bond market rally and as some investors fled volatile technology stocks for more stable issues.
The Dow Jones industrial average leaped 55.64 points, or 1.2%, to a record 4,852.67. And while the broad market also closed higher, the Dow’s gain was far and away the best of any major index.
In the wake of a sharp selloff Tuesday in technology stocks, analysts said some portfolio managers were moving into blue-chip issues whose earnings growth tends to be more predictable.
“People want to buy the cream-of-the-crop stocks, the classy companies,” said Seth Glickenhaus, a veteran money manager.
Indeed, the Dow’s surge--to its 53rd record close this year--was powered by such names as Coca-Cola, up 1 1/2 to 72 3/4; Exxon, up 2 to 76 5/8, and Walt Disney, which rose 1 3/4 to 59 3/4.
In the technology sector, meanwhile, stocks closed mixed after a steep fall on Tuesday, when computer-chip maker Cirrus Logic warned of weaker sales because a major customer had canceled some chip orders.
The stock market was underpinned Wednesday by a solid rally in bonds. The yield on the 30-year Treasury bond sank from 6.31% on Tuesday to 6.25%, nearing the 21-month low of 6.24% set last Thursday. Shorter-term yields also fell sharply.
Traders said bond investors are demonstrating faith that President Clinton and Congress will agree to boost the federal debt ceiling and work out a long-term balanced budget plan, despite bitter political rhetoric in recent days.
Republican leaders are threatening to let government coffers run out in the near-term to force Clinton’s hand on a proposal to balance the federal budget by 2002.
Technical factors related to the debt-ceiling fight could have contributed to Wednesday’s rally, analysts said: Because the Treasury has already postponed three bond auctions--including a 52-week bill auction scheduled for today--Treasuries could be in short supply soon, causing traders to buy what they need now.
“While the lawmakers are seeing doom and gloom out there and a possible [Treasury] default, it’s obvious that Wall Street is not looking at it that way,” said Anthony O’Brien, analyst at A.G. Edwards.
Whatever the reason, the fall in yields gave sidelined stock investors another reason to buy. Winners topped losers by 14 to 9 on the Big Board in active trading.
Among indexes joining the Dow at new highs were the Standard & Poor’s 500 index, up 5.39 points to 591.71; and the NYSE composite, up 2.56 points to 315.55.
Despite many challenges in recent months--and steep selloffs in key technology issues--the 1995 bull market has continued to advance, defying bearish analysts.
Some experts say the market’s ability to hold up is a sign of investors’ still-voracious appetite for stocks.
Among Wednesday’s highlights:
* Blue-chip issues advancing strongly included many brand-name consumer stocks. Philip Morris jumped 1 7/8 to 88 1/4, McDonald’s rose 3/4 to 42, Eli Lilly leaped 2 to 97 1/2 and Procter & Gamble surged 1 1/2 to 82 1/2.
* Banks’ rally resumed as interest rates fell. NationsBank rose 1 to 67 7/8, Bank of Boston gained 1 7/8 to 46 and Citicorp jumped 1 3/8 to 68 5/8.
First Interstate, the target of a potential takeover fight between First Bank System and Wells Fargo, rose 2 1/2 to 129 7/8. First Bank added 5/8 to 51 1/4 and Wells rose 1 1/8 to 211 3/8.
* Bargain-hunters snapped up many retail issues. Sears gained 1 7/8 to 38 3/4, Dayton Hudson leaped 2 to 75, Ann Taylor surged 1 3/8 to 15 5/8 and Federated Department Stores added 1 1/4 to 28 1/4.
* In the tech area, many semiconductor stocks added to Tuesday’s declines on nervousness about future demand for computer chips. Intel fell 7/16 to 65 15/16, National Semiconductor lost 1 1/4 to 22 and Motorola sank 1 1/2 to 64 3/4.
But Cirrus Logic inched up 5/8 to 28 5/8 after diving 31% Tuesday. And after the market closed the Semiconductor Industry Assn. reported a rise in chip orders in October, surprising some analysts who expected to see weaker orders.
* While chip stocks stumbled, buyers swarmed again for Internet-related software stocks, including Uunet, up 7 1/16 to 71 9/16; Netscape, up 4 to 99; and Santa Monica-based Quarterdeck, up 1 to 27 1/2. After the market closed Quarterdeck reported record quarterly revenues but a small loss after one-time items.
Another Southland tech issue, educational software firm Davidson & Associates, fell 6 1/2 to 27 after reporting disappointing earnings.
In currency trading, the dollar shrugged off a tumbling Mexican peso and rallied against the German mark, though it closed lower against the Japanese yen.
