FINANCIAL MARKETS : Blue Chips Gain in the Year-End Tradition
Blue-chip stocks got a boost from traditional year-end buying Tuesday and the stock market rose, but not everyone got a benefit from the Santa Claus effect.
Technology shares were mixed. Retailers headed downward as sales figures from the mostly depressing Christmas season filtered in.
The Dow Jones industrial average rose 12.29 points to close at 5,110.26.
Big Board volume totaled a light 217.04 million shares as of 4 p.m., down from Friday’s 289.61 million. Although volume was light, the American Stock Exchange surpassed a volume milestone Tuesday, breaking through the 5-billion-share mark for 1995. It was its first time to exceed that number; it finished the day at 5.005 billion shares. In November, the exchange broke its previous all-time volume record of 4.5 billion shares set, in 1993.
The stock market has risen in the last week of the year in 32 of the past 42 years, reports Yale Hirsch’s Stock Traders Almanac. The trend, dubbed the Santa Claus effect, continued Tuesday.
“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.
A post-Christmas rally is traditionally fueled by end-of-the-year bonuses, contributions to individual retirement accounts and 401(k) retirement plans, and year-end portfolio rearrangements by money managers.
“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 Inc. in Philadelphia. “As long as that positive cash flow continues, there’ll be a need to spend it” on the part of money managers.
A net total of $17.9 billion was invested in stock mutual funds in the week ended last Wednesday, including reinvested dividends, about three times what was added to stock funds in the previous week.
Mary Farrell, investment strategist at PaineWebber Inc. in New York, saw buying in smaller stocks as well but noted the extremely light volume. “It’s a good-cheer rally. The few people doing any trading seem to be in a reasonably positive state of mind.”
With the Washington budget negotiations in recess, the fight between Democrats and Republicans over how to cut the deficit had little effect Tuesday. Shifting sentiment over the budget pushed the market around last week.
Among market highlights:
* Coca-Cola shares surged after rival PepsiCo said its international beverage shipments may expand 5% to 6% in the fourth quarter, matching domestic gains. Pepsi was unchanged at 55 3/8.
Last week, Coke shares tumbled 6 5/8, or 8.4%, as it forecast weaker-than-expected fourth-quarter international shipments. The shortfall was probably “a blip in the data,” and Coke probably resumed a share buyback program this week, a research report from S.G. Warburg & Co. said.
* Shares of the regional telephone companies rose after investors bet that Congressional negotiators working on a telecommunications reform bill would make it easier for the Baby Bells to market local and long-distance telephone services together. Nynex rose 1 5/8 to 51 3/4 and Bell Atlantic gained 1 1/4 to 66 7/8. But AT&T;, which stands to lose from increased competition, fell 1 3/8 to 64 5/8.
* Oil shares rallied as natural gas and heating oil prices climbed in response to cold weather in the Northeast, Midwest and Mid-Atlantic states, brightening the outlook for next year’s earnings. Royal Dutch Petroleum jumped 1 3/8 to 140 1/4, Chevron climbed 3/8 to 52 1/2, Mobil added 3/8 to 112 and Amerada Hess rose 1/2 to 52.
* Technology shares were mixed. Computer maker Hewlett-Packard gained 1 to 85 5/8, but chip maker Cyrix fell 2 to 23 1/8 after it forecast a fourth-quarter loss of more than 40 cents a share.
* Major retailers were mostly lower. Clothing chain Gap lost 1 7/8 to 41 3/8. Sears, Roebuck lost 1 1/8 to 38 3/8. The Johnson Redbook Service, an authoritative industry data provider, said Christmas sales rose a weak 3.9% for 1995 over last year.
* Biotechnology shares, which soared last week on optimism over the potential success of new drugs from a small number of companies, gave back some gains Tuesday. Centocor, whose two successful tests of its heart drug ReoPro spurred the rally, lost 7/8 to 29 5/8. Several smaller issues still maintained gains. NPS Pharmaceuticals rose 3 1/2 to 15 1/2, and Idec Pharmaceuticals rose 2 1/2 to 23 1/8.
