Dow Gains 44 as Bonds Rally Briskly
Blue-chip stocks ended a volatile session sharply higher Tuesday, with buyers storming back into the market as bond yields plummeted and the dollar rallied.
The Dow Jones industrial average gained 44.44 points to 5,088.22, responding to a late rally in bonds that produced the biggest one-day drop in yields since Dec. 19.
The 30-year Treasury bond yield sank to 6.05% from 6.14% on Friday. The bond market was closed Monday for the holiday.
Bonds rallied early in the day as key commodity prices continued to slide. Then yields dove sharply late in the day, after retail sales tracker Johnson Redbook reported dismal sales in the latest week.
“The economy is a sick puppy here,” said Lawrence Marks, a managing director at Harbor Capital Management in Boston.
A weakening economic outlook in Europe, meanwhile, continued to push bond yields there lower on Tuesday and stoked expectations that European central banks will cut short-term rates even more deeply than the Federal Reserve Board is expected to do this year.
That helped to rally the dollar. So too did comments from savvy investor George Soros, who said he expects the Japanese yen to weaken against the dollar for the next two years.
The dollar closed at 105.82 yen in New York, up 0.62 yen from Tuesday. It also rose to 1.466 German marks, up from 1.449 on Monday and the highest since Sept. 20.
In the stock market, the turn in bonds helped pull the Dow up from an afternoon deficit of 25 points.
Winners topped losers by 14 to 9 on the Big Board, as volume grew to 425 million shares.
Battered technology stocks helped lead the reversal, pulling the Nasdaq composite index up 7.30 points to 995.87 for the day.
Investors were also cheered by some strong fourth-quarter corporate earnings reports. But after the market closed, a worse-than-expected report from computer chip giant Intel raised fears about another tech stock sell-off today.
Among Tuesday’s highlights:
* Companies advancing on positive earnings news included Honeywell, up 3/4 to 46 3/8; Johnson Controls, up 2 5/8 to 67 3/8; Rockwell, up 1 7/8 to 55; Ameritech, up 2 1/4 to 59 1/2; and brokerage Charles Schwab, up 1 to 19 7/8.
* Banking stocks also gained on the strength of some earnings reports, including healthy reports from Wells Fargo and Citicorp. Wells shares rose 4 1/4 to 214 5/8 while Citicorp shot up 4 3/4 to 68 1/4.
* In the tech sector, Intel surged 2 3/8 to 55 3/4 before its disappointing earnings were announced. Other gainers included Compaq, up 2 3/4 to 46 3/4; Microsoft, up 3 7/8 to 86 3/8; IBM, up 3 7/8 to 87; and Sun Microsystems, up 4 to 41 7/8. Sun’s earnings, reported after the market closed, were better than expected.
* Health-care stocks continued to advance. Lilly rose 1 7/8 to 52 1/4, Schering-Plough surged 1 3/8 to 53 3/8 and Biogen leaped 3 1/4 to 63 3/4.
* Utility stocks jumped as bond yields tumbled. The Dow utility index gained 1.6%.
* On the downside, DSC Communications slumped 3 13/16 to 23 1/16 on a weaker-than-expected earnings report. Another loser was computer wholesaler Merisel, down 1 3/8 to 4 1/4.
In commodity trading, grain prices plummeted as speculators sold millions of bushels’ worth of contracts, despite projections that stockpiles of corn and wheat will soon be at 20-year lows. Also, oil prices dropped to six-week lows on reports thta Iraq may finally agree to United Nations terms that will allow limited oil sales.
