FINANCIAL MARKETS : Blue Chips Gain in ‘Santa Rally’; Yields Decline
Blue-chip stocks got a boost from traditional year-end buying Tuesday and most major market indexes rose, in what has come to be celebrated as the annual “Santa Claus rally.”
Another modest decline in long-term bond yields helped sentiment, after major retailers confirmed weak holiday sales.
The Dow Jones industrial average added 12.29 points to close at 5,110.26, and winners topped losers by 12 to 10 on the New York Stock Exchange.
The Nasdaq composite index gained 2.48 points to 1,049.37.
But trading was light, with Big Board volume at just 217 million shares as many market players took extended holidays.
In 32 of the past 42 years the stock market has risen in the last week of the year, according to Yale Hirsch’s Stock Traders Almanac. The market’s usual bullish bias in this period is dubbed the Santa Claus rally.
“You’ve got steady buying in the blue chips,” said Robert Stovall, president of Stovall-Twenty First Advisers in New York. “Institutions are still buying some of the winners of 1995 as window-trimming to make their lists look a little better.” Money managers often want to be seen as holding favored stocks when they publish year-end reports to their clients.
In addition, post-Christmas rallies in recent years have been fueled by end-of-year cash bonuses, contributions to individual retirement accounts and 401(k) retirement plan investment.
That strength could continue in early January, some analysts say. “If you look ahead to next week, there’s going to be a wall of money” coming into mutual funds and retirement accounts, said Cummins Catherwood, a money manager at Rutherford, Brown & Catherwood in Philadelphia.
Although volume was light, the usually little-noticed American Stock Exchange reached a volume milestone Tuesday, breaking through the 5-billion-share mark for all of 1995, the first time annual volume has surpassed that mark.
With the Washington budget negotiations in recess, the fight between Democrats and Republicans over how to cut the deficit had little effect on trading Tuesday.
The bond market provided support for stocks, as yields eased on news that Christmas retail sales were largely a bust--confirming the economy’s sluggish trend and boosting hopes for lower interest rates ahead.
The yield on the 30-year Treasury bond dipped to 6.03% from 6.06% last Friday.
Among Tuesday’s highlights:
* Shares of the regional Bell phone firms led the market on optimism about final deregulation language in the telecommunications reform bill working its way through Congress. Nynex surged 1 5/8 to 51 3/4, Bell Atlantic rose 1 1/4 to 66 7/8, Pacific Telesis added 3/4 to 34 and US West rose 1 to 35 5/8.
Competitor AT&T;, meanwhile, slumped 1 3/8 to 64 5/8.
* Many energy stocks rallied modestly as natural gas and heating oil prices climbed in response to more cold weather in the Northeast and Midwest.
Royal Dutch Petroleum jumped 1 1/2 to 140 3/8, Chevron added 3/8 to 52 1/2, Atlantic Richfield gained 1 3/8 to 112 1/8 and Consolidated Natural Gas was up 5/8 to 45 1/4.
* Financial stocks showed new strength, with Mellon Bank up 1/2 to 52 1/2, Integra Financial up 1 1/4 to 62 3/4, First Bank System up 7/8 to 50 5/8 and Federal National Mortgage gaining 2 1/4 to 119 3/4.
* Many drug and biotech stocks advanced. Merck shot up 1 5/8 to 66 5/8, Eli Lilly rose 3/4 to 56 1/2, Amylin Pharmaceutical rocketed 1 3/8 to 8 1/2 and Somatogen surged 1 3/8 to 20 1/8.
* Coca-Cola rebounded 2 5/8 to 74 5/8 after sliding last week when the company warned of weaker-than-expected fourth-quarter international shipments.
Rival PepsiCo on Tuesday said that its international beverage shipments may expand 5% to 6% in the fourth quarter, also at the low end of analysts’ forecasts. PepsiCo shares still added 1/8 to 55 3/4.
Investors appeared to view the soft drink giants’ international slowdowns as temporary. Also, some analysts said Coke may have resumed its stock-buyback program, boosting the price.
* Technology shares were mixed. Hewlett-Packard gained 1 to 85 5/8 and Seagate shot up 1 5/8 to 49 7/8, but chip maker Cyrix fell 2 to 23 1/8 after it forecast a fourth-quarter loss.
* Major retailers were mostly lower on Christmas sales news, but investors seem to have largely anticipated the disappointment. Gap dropped 1 7/8 to 41 3/8, Sears lost 1 1/8 to 38 3/8, May Department Stores fell 7/8 to 41 1/2 and Wal-Mart slipped 1/4 to 22 3/4.
Overseas, Tokyo shares hit another 14-month high on rising expectations for the Japanese economy. The Nikkei 225 index gained 129.31 points to 19,904.72. Early today it crossed the 20,000 mark before edging back.
