FINANCIAL MARKETS : Stocks Return to Setting Record Highs
Blue-chip stocks returned to breaking records Wednesday after a four-day hiatus, with the two major indexes hitting new highs as a host of companies reported positive earnings potential and computer-driven buying lifted prices ahead of Friday’s expiration of options and futures contracts.
The Dow Jones industrial average rose 41.55 points to 5,216.47, its first close above 5,200. The Standard & Poor’s 500 Index rose 2.91 points to a record 621.69, reached on just 499 stocks--LSI Logic is not scheduled to replace Scott Paper in the index until the close of trading on Wednesday.
The Nasdaq composite index rose 4.46 points to 1,056.53, erasing most of yesterday’s 9.42-point drop.
“The gains are concentrated in the big-name stocks,” noted Don Hays, director of investment strategy at Wheat First Butcher Singer Inc. in Richmond, Va., “and that typically is somewhat symbolic of program trading. The broad market is just barely up.”
While the Dow was up 0.80% and the S&P; 500 was up 0.47%, the small-company Russell 2000 index was up 0.33%.
Blue-chip stocks are often volatile ahead of the quarterly “triple witching” expiration of stock options, stock index options and stock index futures. That combination often prompts buying or selling of every issue in the Dow 30. A host of drug and health-care stocks gained after Merck told analysts that the outlook for its pipeline of new products remains strong. Merck’s shares gained 1 7/8 to a record 65 1/8.
A government report of unexpectedly strong November retail sales helped push the 30-year Treasury bond yield up slightly, to 6.07% from Tuesday’s close of 6.05%. The Commerce Department said retail sales rose 0.8% in November; analysts had expected a rise of 0.6. The report came after Tuesday’s news that wholesale prices had risen an uncomfortably high 0.5% last month. Both reports stirred investors’ fears that the economy may be growing too fast to justify an interest-rate cut next week by the Federal Reserve Board.
In addition, the bond market shrugged off Treasury Secretary Robert E. Rubin’s announcement that he may consider a new “extraordinary action” that will allow the U.S. to avoid a debt limit crisis at year’s end. Rubin said he could withhold interest payments to the civil service trust fund on Dec. 29 but that the interest payments will eventually be restored to the fund.
Corn, soybean and soy product prices surged to new highs on Wednesday as weather reports showed little relief in the near term for the drought that is affecting Brazilian crops.
Among stock market highlights:
* Investors anticipated an end to the 2-month-old strike at Boeing; its stock rose 2 1/8 to 76 1/2.
* Shares of telephone companies also gained. U.S. lawmakers are approaching completion of a bill to revise the 1934 U.S. communications law and that would let regional phone companies enter the $70-billion-a-year long-distance market. SBC Communications rose 1 1/8 to 57 1/8, Pacific Telesis Group jumped 1 1/4 to 34 1/4, Bell Atlantic spurted 1 3/4 to 67 3/8 and US West gained 1 1/8 to 34.
* After Merck made its announcement, other drug and health-care shares gained. They included Eli Lilly, up 7/8 to 102 1/8; Pharmacia & Upjohn, up 1 1/8 to 39 1/4; Johnson & Johnson, up 1/8 to 90 7/8; Rhone-Poulenc Rorer, up 3/8 to 50; and American Home Products, up 2 1/2 to 97 3/8.
Abbott Laboratories’ shares gained 1/8 to 41 3/4. A federal advisory board recommended use of the company’s antibiotic Biaxin Filmtab, in combination with Astra Merck’s Prilosec, to kill the bacteria that cause most ulcers.
* One of the biggest gainers of the day was BayBanks. Its shares surged 7 1/2 to 92 1/2 after Bank of Boston announced late Tuesday that it had agreed to buy its rival for $2 billion in stock. Bank of Boston stock slid 1 3/4 to 43 5/8.
* Oil stocks extended gains of earlier this week as oil prices continued to rise. Dow industrials components Exxon rose 1 3/8 to 85 7/8, Chevron added 5/8 to 53 3/8, and Texaco gained 1 to 80 1/8.
Despite the rise in oil prices, airline stocks made strong gains, pushing the Dow transportation average up 13.76 points, or 0.66%, to 2,084.54. The gains were led by airline freight companies Federal Express, up 1 3/8 to 81 5/8; and Airborne Freight, up 1 1/4 to 29. Federal Express said after the market closed that its second-quarter profit rose to $1.57 a share from $1.53 a year ago.
* Computer-related stocks were mixed. IBM fell 7/8 to 94 1/2, Hewlett-Packard dropped 2 3/8 to 80 3/4, and Seagate Technology lost 1 7/8 to 51 1/4.
* Among the biggest decliners for the day was Motorola. The cellular phone and semiconductor company’s stock fell 1 5/8 to 59 7/8 after it was removed from Dean Witter Reynolds’ “recommend” list. The stock is down about 7% since Nov. 28 because of concern about an industrywide slowdown in cellular-phone growth.
* Kimberly-Clark jumped 1 1/4 to 79 3/4 after the paper and consumer-products company said it will cut 6,000 jobs by next summer and sell as many as 12 manufacturing operations. The action follows the company’s $9.4-billion acquisition of Scott Paper.
In overseas stock markets, the Nikkei 225-share index in Tokyo was down 0.15%; French and German exchanges declined as well.
But the FTSE-100 index in London was up 0.21% after the Bank of England cut a key interest rate by 0.25% on Wednesday.
