Dow and Techs Rebound on Budget Hopes
Stocks regained their footing Thursday after two days of sharp losses, as technology issues snapped back and blue-chip shares gained on hopes for a breakthrough in federal budget talks.
The Dow Jones industrial average ended up 32.16 points at 5,065.10 following losses totaling more than 165 points Tuesday and Wednesday amid heavy selling in technology shares.
The Standard & Poor’s 500 index advanced 4.23 points to 602.71. Gains would have been greater were it not for three series of computer-guided orders to sell stocks, according to Birinyi Associates.
Analysts said the market appeared still on edge, waiting for developments in the federal budget impasse.
“People are really going to be on hold here for another week until they see what they’re going to do with the budget business,” said BT Brokerage trader Jim Benning.
Bargain hunters scooped up the heavily battered technology stocks. The Nasdaq index, laden with high-technology issues, rose 20.89 points, or 2.1%, to 1,011.10.
“The Nasdaq has gotten hit over the past few day, and a lot of people are buying when the prices are down, but it’s still pretty shaky out there,” said Melissa Brown, Prudential Securities’ chief quantitative researcher, referring to both the federal budget and uncertainty over corporate earnings.
Some analysts and traders said they did not trust the recovery. “Things were pounded down so far,” said Richard McCabe, chief market analyst at Merrill Lynch & Co., “that in the absence of any further bad news, the thing just got into this reflex rally, or spring back.”
But there was optimism as well. “As we get further into January and February, you’re going to get far more companies meeting and exceeding [earnings] expectations,” said James Weiss, deputy head of equities at State Street Research & Management, which oversees more than $30 billion. Rising profits will ease investors’ recent concern that there “might be no earnings growth. I don’t buy that. The world has not come to an end.”
Others said President Clinton helped the market with his news conference Thursday, at which he expressed optimism that a balanced-budget deal can be completed.
“The market is taking [the news conference] as an excuse, but it’s really bouncing from an extreme level that it got to yesterday,” said Leon Brand, global market strategist at NatWest Securities.
House Speaker Newt Gingrich, who roiled financial markets Wednesday by saying budget talks could drag through the 1996 presidential and congressional elections, said Thursday that no budget deal was better than a “bad deal.”
Analysts said the inflation-sensitive bond market was partly helped by a sharp drop in crude oil prices.
On the New York Mercantile Exchange, February crude ended down 88 cents at $18.79 a barrel on forecasts of above-normal temperatures in the the Northeast and Midwest over the next six to 10 days.
The benchmark 30-year Treasury bond yield fell to 6.15% from 6.19% on Wednesday.
Among market highlights:
* Among technology stocks, Xilinx Inc. rose 3-9/16 to 31-13/16 after reporting a sharp rise in fiscal third-quarter earnings. Apple Computer Inc. rose 3/4 to 35 after saying late Wednesday that it expected to report an operating loss of $68 million in the first quarter and that it planned to restructure its business.
Among other technology stocks, Intel Corp. rose 2 3/4 to 56 7/8, and Microsoft Corp. gained 4 1/4 to 86 5/8. Applied Materials Inc. gained 1 7/8 to 36, while International Business Machines Corp. ended flat at 87 1/4.
* J.P. Morgan & Co. rose 1 7/8 to 76 3/8 on strong fourth-quarter earnings.
Overseas stock markets reacted negatively to Wall Street’s losses on Wednesday. The Nikkei index in Tokyo lost 1.14%. Stocks also fell in London, Paris and Frankfurt.
