FINANCIAL MARKETS : Late Buying Puts Dow in Record Books; Gold, Bond Yields Rise
A late round of buying boosted blue-chip stocks to a record high Monday as Wall Street looked beyond the Washington budget feud and a fresh Republican threat to push the United States into default.
“In the long scheme of things, what’s going on in Washington is not as relevant as the politicians and media make it,” said Tony Dwyer, chief market strategist of Josephthal, Lyon & Ross.
Joseph Battipaglia, chief investment strategist for Gruntal & Co., did not see an imminent U.S. default. Treasury Secretary Robert Rubin “has all the flexibility to carry on government operations for well into this year,” he said.
Nonetheless, traders blamed the default threat for a reverse in the recent trend toward lower bond yields. The yield on the Treasury’s main 30-year bond rose to 6.04% from 5.97% late Friday.
Gold prices hit 2 1/2-year highs and ended above $400 an ounce on Monday on the news of further impediments to a budget accord.
The Dow Jones industrial average surged 34.68 points to 5,219.36, topping the previous record close of 5,216.47 set Dec. 13. In the broader market, gainers beat losers 1,190 to 1,097 on heavy volume of 396 million shares.
Birinyi Associates Inc. said two rounds of program buying aided the Dow’s ascent.
Technology stocks firmed, lifting the Nasdaq composite index 10.99 points, or 1.08%, to 1,029.44.
Corporate earnings remained a key focus. Last week, “IBM and Microsoft had good results and Intel was a bust. But it’s been an acceptable period so far,” said Joseph Barthel, Fahnestock & Co.’s chief investment strategist.
Technology stocks have bounced back, Barthel said. “The tech stocks for the most part are doing well. It boils down to responding more to oversold extremes than news events.”
Micron Technology was up 3/4 to 31 3/4, rebounding from weakness after its chairman resigned last week.
Woolworth rose 1 1/8 to 11 after the Greenway Partners investment fund, a major shareholder, proposed that the retailer spin off its athletic footwear division to shareholders.
Among market highlights:
* Chrysler surged 3 5/8 to 57 3/4. Merrill Lynch raised its earnings estimates for the company, and Smith Barney upgraded its rating. The stock rose 1 7/8 Friday after Chrysler’s fourth-quarter results beat expectations.
* Harley-Davidson rose 3 1/2 to 30 3/8 after announcing the sale of its Holiday Rambler recreational vehicle unit. Harley also said it may sell its commercial vehicle and plastics businesses.
* Maybelline lost 1 1/4 to 43 5/8 as a bidding war for one of the nation’s largest cosmetics companies ended after L’Oreal raised its offer to $44 per share, or $762 million, and Germany’s Joh. A. Benckiser withdrew from contention.
* First Interstate rose 5 to 143 7/8 on news that it was in final merger talks with Wells Fargo.
Wells launched a hostile takeover bid for Interstate in October, prompting Interstate to seek a white-knight merger with First Bank System of Minneapolis. First Bank’s bid was dealt a severe blow when the SEC ruled it could not buy back its own shares for two years. Wells rose 5 1/2 to 222 3/4, and First Bank rose 1 5/8 to 50 1/8.
* AT&T; fell 1 to 64 5/8, and Hughes Electronic surged 4 3/4 to 52 3/8. ATT will market and distribute Hughes’ DirecTv service and take a small DirecTv stake.
* Cordis surged 7 13/16 to 107 9/16 and Johnson & Johnson added 1/4 to 86 3/4. The due diligence period for J&J;’s planned $1.8 billion acquisition of Cordis expired, calming Wall Street fears that the deal might be coming unglued.
* Netscape jumped 16 3/8 to 161 and American Online climbed 4 1/4 to 39 1/4. The Wall Street Journal reported the companies were talking about using Netscape’s Internet-searching software on American Online.
Coffee set five-week highs at New York’s Coffee, Sugar and Cocoa Exchange as key coffee producers prepare to discuss plans to lift prices.
The Assn. of Coffee Producing Countries is to meet today in London. New York coffee traders were nervous that the group may devise a plan to lift world prices by curbing exports. March coffee rose 2.85 cents to 107.50 cents per pound on the exchange.
“I don’t think anything is going to come out of the ACPC meeting,” Merrill Lynch analyst Judith Ganes said. “But people want to reserve judgment ahead of it.”
Market Roundup, D8
