Dow Just Shy of Record High
Blue-chip stocks surged Monday as renewed hopes for falling interest rates and bargain hunting sent the Dow Jones industrial average close to another record high. But technology shares stumbled again as investors remained leery of pricing pressures in the industry.
Gold prices tumbled to their lowest levels in two months as the metal’s 1996 rally continued to fade, further suggesting that inflation will not be a problem in the near future.
The Dow Jones industrial average ended with a gain of 63.59 points at 5,600.15 after a rally of more than 90 points stalled at 5,629.05--just shy of the record closing high of5,630.49 set Feb. 23.
In the broader market, advancing issues swamped decliners 1,614 to 760 on active volume of 417 million shares on the New York Stock Exchange. Standard & Poor’s composite index of 500 stocks rose 6.44 points to 650.81.
But the Nasdaq composite fell 1.20 points to 1,084.88 as key technology issues continued to struggle.
Analysts said a late sell-off in International Business Machines, one of the 30 components of the Dow index, prevented the index from charging into record ground. IBM closed with a loss of 2 at 116 1/8.
Investors bought economically sensitive stocks after new data heightened expectations that the Federal Reserve Board will lower interest rates when its policy-making Federal Open Market Committee meets March 26.
The Commerce Department said consumer spending dropped in January at the sharpest rate in nearly 3 1/2 years while income grew only weakly.
Reflecting Wall Street hopes about interest rates, the benchmark 30-year Treasury bond gained 14/32, and its yield fell to 6.33% from 6.36% Friday, and compared with 6.47% last Thursday.
The fall in bond yields, which started Friday, represents a reversal in direction for the market, which has seen yields heading steadily upward during the past few weeks on concerns that expected interest-rate reductions may be in jeopardy because of signs of economic strength.
High-technology stocks continued to retreat in reaction to negative comments by Compaq Computer on Friday. The world’s largest personal computer maker said it would step up its promotional programs and price cuts to achieve its first quarter sales objectives.
Among high-tech stocks, Cisco Systems, the most actively traded Nasdaq issue, was down 1 3/8 at 44 1/8, Compaq was off 1 5/8 at 40, Intel was down 1 3/16 at 54 7/8, Sun Microsystems lost 1 1/4 and Hewlett Packard was down 3/4 at 93 3/4.
Among other market highlights:
* Analysts said traders were in a bargain-hunting mood, and the stocks of retailers, which had been laggards recently, were among the big winners.
Tony Dwyer, chief market strategist at Josephthal Lyon & Ross, said the retailers were also showing strength in anticipation of an acceleration in the economy.
“The retailers are up on anticipation that there will be some pickup in the economy and the belief that . . . people will have money to spend,” Dwyer said.
Among retailers, Home Depot was up 3 1/4 at 47 3/4, Federated Department Stores was up 1 7/8 at 33 1/8, Wal-Mart was up 3/4 at 22 3/8 and Sears Roebuck gained 7/8 at 49 1/8.
* BankAmerica hit a new record high of 75 1/2, up 1 1/4, as the San Francisco-based banking giant announced a $2-billion stock buyback program. The new program replaces one announced in February 1995 and essentially adds $1.15 billion to the amount to be repurchased by the end of 1997. BofA also said it will repurchase up to $1 billion of its preferred stock by year-end 1997, adding about $663 million to the amount to be bought back under existing programs.
* Pharmaceutical companies scored strong gains. Merck was up 1 at 68 3/8, Pfizer was up 1 3/4 at 68 1/4 and Johnson & Johnson was up 3/4 at 96 3/4.
Abbott Laboratories gained 1 5/8 to 43 7/8 after the Food and Drug Administration on Friday approved Ritonavir, the company’s new AIDS drug. Pharmacia & Upjohn added 1/8 to 43 after disclosing plans to close 40% of its 56 factories and research fewer drugs.
* Alumax lost 2 3/4 to 33 1/2 after Kaiser Aluminum withdrew on Saturday its buyout offer for Alumax of up to $2.5 billion in cash and stock. Kaiser fell 1/4 to 14 7/8.
* Infinity Broadcasting added 1 1/2 to 43 3/8 on news that the nation’s biggest independent radio company said it is buying a dozen stations in five markets for $410 million in cash.
In foreign markets, London’s FTSE 100 closed up 15.9 points to 3,768.6, near to the 3,781.3 all-time closing best made on Feb. 2. Tokyo’s 225-share Nikkei average index closed down 104.75 points, or 0.52%, to 20,063.88.
In Mexico City, stocks fell for the fifth time in the last six sessions amid concern rising interest rates will hurt company earnings. The Bolsa index fell 12.67 points, or 0.44%, to 2879.73.
Gold prices fell as a new year’s rally that had carried the market to six-year highs faded, and disappointed investors scrambled to sell.
“People were getting impatient and the price of gold wasn’t going anywhere,” said Greg Drury, director of precious metals at Mitsui & Co. in the United States. “They said, ‘I’ll take my money and go play somewhere else.’ ”
At New York’s Commodity Exchange, gold for April delivery tumbled $5 to $395.20 an ounce, the lowest since Jan. 3 and off nearly $25 from the six-year high of $419.60 reached on Feb. 2.
Other precious metals prices also fell. May silver lost 12.3 cents to $5.417 an ounce and April platinum dropped $4.80 to $408 an ounce.
Also Monday, the Commodity Research Bureau’s commodities index fell 0.85 point to 243.61. The index, an indication of inflation on the producer level, posted a sharp decline Friday.
* SLUGGISH ECONOMY: Consumer spending sees biggest drop in three years. D2
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Dow’s Big Days
Moves of 50 points or more are becoming commonplace for the Dow Jones industrial average. Number of days the Dow moved 50 or more, annually and so far in 1996.
1992: 7
1993: 4
1994: 15
1995: 13
1996: 15
