Tech Rally Leads Stocks to New Highs
A tame bond market and a pullback in some commodity prices helped stocks regroup and jump to record levels Monday, with technology shares in the lead.
Meanwhile, the dollar suffered a steep decline against key currencies after its strong recent rally.
On Wall Street the Dow Jones industrial average, Standard & Poor’s 500 index and Nasdaq composite index reached new highs in unison for the first time in about two months.
“It’s hard to keep a good market down,” said Alan Ackerman, senior vice president at Fahnestock & Co. “The money flow into the markets is remarkable. Stocks continue to show tremendous resilience.”
The Dow industrials shook off early profit taking and zoomed 33.60 points in late trading to close at 5,407.59.
The Nasdaq composite, heavily influenced by technology stocks, rose 11.23 points to 1,083.34, its second consecutive record close.
In the broad market, advancing issues led decliners 12 to 11 on the New York Stock Exchange and 20 to 18 on Nasdaq. Trading was moderate.
Technology stocks were the market’s stars Monday, continuing to rebound from their steep declines in January, when many investors sold the stocks on worries about a slowdown in the computer industry.
IBM paced the tech rally, rising 2 5/8 to 112 1/4. Other big gainers included Microsoft, up 4 1/8 to 97 1/8; semiconductor maker Texas Instruments, up 5 1/8 to 53 1/8; and computer networker Cisco Systems, up 3 1/4 to 87 3/4.
“With the economy slowing, the growth you get in technology has to be worth a premium,” said Lary Aasheim, a computer analyst at CoreStates Investment Advisers, which manages $10 billion.
The recent slide in a host of computer-related shares “doesn’t make any sense, considering the strong revenue and earnings growth they’ve had” relative to other companies, Aasheim argues.
In the stock market overall Monday, investors were encouraged as long-term bond yields’ recent rise appeared to stall.
The 30-year Treasury bond yield ended at 6.15%, down slightly from 6.16% on Friday. Shorter-term yields were up slightly, however.
A retreat in gold prices--after last week’s surge--helped ease concern that inflation might accelerate later this year and spook the bond market, traders said.
February gold futures eased $1.70 to $413 an ounce on the Comex in New York, after jumping $8.90 last week.
But analysts still expressed concern about the near-term trend in bond yields, with the Treasury today beginning its quarterly refinancing. The government will auction $44.5 billion in three-year, 10-year and 30-year securities today, Wednesday and Thursday, respectively.
That heavy supply might continue to force yields up, traders warned. But Karl Tourville, who manages $2.5 billion in fixed-income securities at Galliard Capital Management in Minneapolis, argued that yields won’t have to “go [up] too much more to get the auctions successfully covered.”
Elsewhere, the dollar was a source of concern Monday as its latest rally sparked a sudden wave of profit taking by currency speculators. The dollar plunged to 1.4675 German marks in New York from 1.4815 on Friday, and to 105.20 Japanese yen from 106.45.
Although traders said the dollar was due for a bout of profit taking, the sell-off was prompted by prospects that interest rates would continue to head lower in the United States while holding steady in Europe. Traders tend to flock to currencies with higher relative interest rates.
Many traders had expected German interest rates to be cut again soon, but a stronger-than-expected report on German economic growth Monday dashed hopes.
Dealers said the dollar should rebound in coming weeks if Japan continues to show signs of economic improvement. Japan’s recovery should help boost U.S. exports, relieving Japanese firms of the need to unload dollars in the open market.
Among Monday’s market highlights:
* Technology stocks rose across a broad spectrum. Winners included Intel, up 1 3/4 to 58 1/2; Compaq, up 3 3/8 to 50 7/8; Dell, up 3 3/8 to 32 1/2; and Computer Associates, up 1 3/4 to 71.
As for beaten-down semiconductor stocks in particular, “my research work shows that semiconductors were very oversold two weeks ago and we’ve had decent bounces, but the question is: Are they breaking downtrends?” said Gail Dudack of UBS Securities.
* Also in the tech sector, software firm Broderbund rose 3 to 53 1/8. But after the market closed, the firm warned of disappointing earnings this quarter.
* Hilton Hotels jumped 9 1/2 to 83 3/8 after it hired Disney’s chief financial officer, Stephen Bollenbach, as its president and chief executive. Disney fell 3/8 to 61 5/8.
* Hayes Wheel lost 4 5/8 to 19 3/8 after Varity Corp. withdrew its proposal to buy the equity interest it does not already own, for $25 cash a share.
* Among stocks responding to earnings, Adolph Coors lost 3 1/4 to 18 3/4. The brewer on Friday reported a sharp drop in fourth-quarter earnings.
* Some HMO stocks were down after U.S. HealthCare warned of pressure on profit margins. U.S. HealthCare fell 4 1/8 to 44 3/4, PacifiCare A lost 2 3/4 to 86 1/4 and United Healthcare dropped 3/4 to 62 3/4.
* Telefonos de Mexico fell 1 to 32 7/8 in U.S. trading. Lehman Bros. cut its 1995 earnings estimate on the Mexican phone company and a market source said Morgan Stanley downgraded the stock.
In commodities trading, orange juice prices fell despite an overnight freeze that damaged an undetermined amount of fruit across the Florida citrus belt.
Temperatures across the Citrus Belt plunged below 30 degrees Monday, reducing potential yields and stunning the buds that will spawn next year’s crop.
But prices at the New York Cotton Exchange fell, with the contract for delivery in March off 4.75 cents to 121.10 cents a pound. Reflecting the damaged buds, however, thinly traded contracts calling for delivery next winter were steady.
Market Roundup, D8
