Financial Markets : Dow Again Sets Record After Volatile Session
The Dow Jones industrial average closed at a record high Friday after a wild session in which it gained and then lost about 50 points before bouncing back strongly in late trading.
The Dow index ended with a gain of 22.03 points at 5,630.49, beating the previous high set Thursday when it soared 92.49 points to 5,608.46. For the week, the index gained 127.17 points.
However, in the broader market, declining issues led advancers 1,250 to 1,097 on active volume of 439 million shares on the New York Stock Exchange.
The Nasdaq composite index eked out a new high, with a gain of 0.68 of a point to 1,117.79.
The blue-chip market was extremely volatile, as it leaped 50 points in the first few minutes of trading then lost nearly 50 points on profit taking. A late surge of buying lifted the index to the new high.
Analysts said hopes that the Federal Reserve Board would soon lower interest rates helped push stock prices higher in early trading, and cash-rich mutual funds were quick to take advantage of any dip in the market to buy.
Stocks also focused on the Treasury market.
Interest rates in the bond market initially fell on news of a weaker-than-expected 0.9% rise in fourth-quarter gross domestic product, but rose again after January housing starts were reported up a surprisingly strong 4.4%.
Some traders said yields were also pushed higher after stories circulated, and were later confirmed, that Morgan Stanley had urged investors to short bonds. In a short sale, a trader sells a borrowed bond and hopes its value falls before he or she has to buy it back to complete the transaction.
At the end of the day, the key 30-year Treasury bond lost nearly a full point, raising its yield to 6.40% from 6.33% at Thursday’s close.
Leon Brand, global market strategist at NatWest Securities, said he expects more volatility in stocks as investors regroup after Wall Street’s drive to new heights.
“I think the market needs a rest here for a couple weeks,” he said.
Among market highlights:
* Hewlett-Packard rose 1/4 to 103 3/8, recovering from a low of 100 3/8. Salomon Bros. downgraded the stock to “buy” from “strong buy,” citing its rising stock price.
* IBM continued to climb, finishing up 1 1/2 at 125 5/8. Compaq rose 5/8 to 51 7/8 after settling a lawsuit with closely held Packard Bell.
* AMR rose 1 7/8 to 89 1/2, after Salomon Bros. upgraded the stock, saying the airline holding company was “about to start a process which will maximize shareholder value.”
* Two-way paging company Mobile Telecommunications Technologies sank 3 3/4 to 14 1/8 after the company said Thursday that it had breached banking covenants. BT Securities downgraded the stock.
* As oil prices fell on expectations of Iraqi sales, Mobil fell 2 1/4 to 114, Texaco dropped 1 1/4 to 81 5/8, Exxon shed 1 1/4 to 82 1/4 and Chevron lost 7/8 to 57 1/4.
In Tokyo, the Nikkei share average sank for the seventh straight day. The 225-share Nikkei average shed 40.56 points or 0.20% to end at 20,300.38, falling 502.39 on the week. In London, the FTSE-100 ended just 0.3 point higher at 3,740.3, down 30.6 on the week. In Frankfurt, the DAX index closed 39.78 points ahead at 2,451.78, rising 22.76 over the week.
Market Roundup, D4
