FINANCIAL MARKETS : Caterpillar, IBM Earnings Boost Dow 57; Yields Decline
The Dow Jones industrial average rocketed 57.45 points to 5,124.35 on Thursday in a surprise rally spurred by healthy earnings reports from some key companies.
But in the broad market stocks’ gains weren’t quite as robust, despite a continuing rebound in some technology shares.
Meanwhile, U.S. bond yields continued to edge lower, and the dollar continued to gain as Britain and France both reduced short-term interest rates by another quarter of a percentage point.
On Wall Street the Dow’s surge was paced by IBM, which leaped 8 5/8 to 96 1/4; and machinery maker Caterpillar, which soared 5 3/8 to 59 1/4. Both reported quarterly earnings above expectations.
The gains in the two stocks accounted for about 42 points of the Dow’s rise for the day.
“When there is good news, investors are ready to move” into stocks, said Abby Cohen, co-chair of investment policy at Goldman, Sachs & Co. “That’s an excellent sign for the overall market” because it indicates there is still cash on the sidelines waiting to jump in, she said.
Still, the broad market had only a modestly good day. Rising stocks led decliners by 14 to 10 on the Big Board in heavy trading. The New York Stock Exchange composite index edged up just 0.86 point to 326.15.
The beaten-down Nasdaq composite index, heavy with tech issues, added 8.94 points to 1,007.24, continuing to seesaw around the 1,000 level.
The sudden bullishness surrounding IBM and Caterpillar contrasted with investors’ downbeat views of companies whose earnings have been disappointing. Kodak, for example, dropped 2 1/8 to 67 on its earnings report; Wal-Mart, which stunned investors with a poor earnings forecast on Wednesday, fell 1 1/8 to 19 1/4.
The market overall continued to be supported by the bond market, where yields declined for a third session. The 30-year Treasury bond yield fell to 5.97%, down from 6.01% on Wednesday and the first close under 6% since Jan. 3.
With the economy weak and European interest rates falling, many analysts are betting on another official Federal Reserve Board cut in U.S. rates later this month. And lower rates are almost always bullish for stocks.
Today’s December employment report from the government could add more weight to economic evidence suggesting enough of a slowdown to merit lower Fed rates.
Among Thursday’s highlights:
* Earnings reports boosted plastics maker Raychem, up 9 1/2 to 62 3/4; telecommunications equipment maker Tellabs, up 3 to 37; and athletic apparel maker Russell, up 1 3/8 to 27 1/8.
* Microsoft rose 2 3/4 to 87 5/8 ahead of its earnings report, released after markets closed. The results exceeded expectations and the stock rose to 89 in after-hours trading.
Among other tech shares, Digital Equipment rose 2 3/4 to 62 1/2, Texas Instruments jumped 3 1/4 to 49 and Oracle gained 1 3/4 to 44 1/2. But Apple Computer plunged 2 1/16 to 31 15/16 after reporting a first-quarter loss Wednesday of $69 million.
In other markets, oil prices continued to rebound Thursday, with February crude futures up 66 cents at $19.18 a barrel on the New York Merc. Many traders are downplaying chances that Iraq will be able to sell oil in the world market soon.
The dollar continued to rally as foreign interest rates fell. That helped send British stocks to record highs, with the FTSE-100 index climbing 44.5 points to 3,748.7.
