Rebounding Tech Issues Propel Dow to Another New Record
Blue-chip stocks stormed ahead Tuesday, pushing the Dow Jones industrial average to a record close with the help of strong gains in high-technology shares.
The Dow index ended up 42.27 points at 5,642.42, eclipsing its previous record close of 5,630.49 set on Feb. 23. In the broader market, advancing issues led decliners 1,209 to 1,123 on active volume of 435 million shares on the New York Stock Exchange.
Analysts said Wall Street was encouraged by signs of a slowly rebounding economy that may help corporate profits later this year.
“Stocks can do OK even if interest rates head higher if prospects for good future earnings are there,” said Tom Carpenter, chief economist at ASB Capital Management Inc.
Yields did indeed head higher Tuesday, for the first time in five sessions, after news of increased factory orders seemed to hurt prospects for another interest rate cut by the Federal Reserve Board later this month.
The yield of the Treasury’s main 30-year bond rose to 6.37% from 6.33% late Monday.
Further bond selling was spurred by comments by Fed Chairman Alan Greenspan that suggested recent government reports may be understating the nation’s economic growth and productivity.
Initially the remarks, before a banking industry trade group in Las Vegas, seemed to suggest a view that the economy may not be weak enough to warrant more rate reductions following the Fed’s rate cut in late January.
But the market eventually recovered somewhat after realizing Greenspan “really wasn’t saying anything new,” said John Canavan, an analyst at Stone & McCarthy Research Associates in Princeton, N.J.
Canavan said sentiment in the market seems to have calmed after a sharp sell-off late last month.
The stock market was boosted by the factory news as well as news that U.S. sales of cars and light trucks during February increased 5.6% from a year ago, a possible sign that consumers were back in dealers’ showrooms after severe winter weather hurt business in January.
Ford rose 3/8 to 32 3/8 and Chrysler rose 1/8 to 57 1/2, although General Motors slipped 1/8 to 52 1/4.
The technology laden heavy Nasdaq Composite index climbed 11.93 points to 1,096.81 after losing nearly 23 points in the past three sessions on concern about the earnings.
“Tech stocks. That’s the key,” said Joseph Barthel, chief investment strategist at Fahnestock & Co. “It appears they have made a short-term bottom.”
IBM rose 2 7/8 to 119 after IBM Chairman Louis Gerstner on Monday held an upbeat meeting with analysts.
Bay Networks rose 3 1/4 to 36 7/8, Digital Equipment added 4 5/8 to 65 7/8, Hewlett-Packard was up 3 to 96 3/4 and Cisco Systems added 2 7/8 to 47.
Compaq was unchanged at 40, LSI jumped 1 1/4 to 27 3/4 while Intuit was off 1 7/8 at 43.
Analysts said stocks also got support from expectations that Senate Majority Leader Bob Dole would fare well in “Junior Tuesday” voting, the biggest day so far of the campaign for the Republican presidential nomination.
Among market highlights:
* W.R. Grace jumped 9 1/4 to 77 7/8 after Hercules Chairman Thomas Gossage quit the Grace board following the rejection of his friendly merger proposal. Hercules later said it would not rule out a hostile bid.
* Philip Morris shares hit a 52-week high of 104 1/8 before ending up 2 1/2 to 104. Goldman Sachs upgraded the stock.
* Central Sprinkler tumbled 5 1/4 to 30 1/2 after reporting disappointing earnings due to severe weather, which slowed construction activity and demand for its fire sprinkler products.
* Among initial public offerings, Premiere Technologies, a provider of information and telecommunications services, rose 8 1/4 to 26 1/4. Health Systems Design, a provider of managed-care information systems software, climbed 3 to 16 1/8.
Grain prices fell Tuesday on worries that supplies were not as tight as many traders believed and because of the upcoming soybean harvest in South America, the world’s second-largest producer. At the Chicago Board of Trade, March soybeans fell 6.5 cents to $7.13 3/4 a bushel, and March corn dropped 6 cents to $3.83 1/4.
