Rebounding Tech Issues Help Propel Dow to Another Record

The stock market closed mostly higher for a third straight session on Tuesday, with the blue-chip Dow Jones industrial average reaching a new high.

Ignoring some modest selling in the bond market that lifted yields again, the Dow index shot up 42.27 points to a record 5,642.42, topping its previous record close of 5,630.49 set on Feb. 23.

In the broad market advancing issues led decliners 1,220 to 1,123 on the New York Stock Exchange in active trading.

And the Nasdaq composite index jumped 11.93 points to 1,096.81, as technology stocks rebounded after two days of losses.

Stocks appeared to be bolstered by fresh data indicating that the economy is slowly regaining strength. Factory orders jumped unexpectedly in January and order backlogs surged, the government said Tuesday, evidence that manufacturing may be picking up after months of weakness.

Those reports hurt the bond market. The 30-year Treasury bond yield, which had fallen in the previous two sessions, rose to 6.37% from 6.33% Monday. Shorter-term yields also were up.

Further bond selling was spurred by comments by Federal Reserve Board 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 Fed cuts in short-term rates.

But yields ended the day down slightly from their midday highs as some traders took the view that Greenspan wasn’t saying anything new.

On Wall Street, some analysts say the stock market’s strength in recent months despite rising interest rates shows that stocks and bonds are “decoupling,” meaning that stock investors are paying more attention to the potential for better corporate earnings prospects in a strong economy, even if interest rates move up.

“Stocks can do OK even if interest rates head higher if prospects for good future earnings are there,” contends Tom Carpenter, economist at ASB Capital Management.

Analysts said the market also may be bolstered by expectations that Senate Majority Leader Bob Dole will win the Republican presidential nomination.

Among Tuesday’s highlights:

* IBM led the rebound in tech issues, rising rose 2 7/8 to 119 after Chairman Louis Gerstner on Monday held an upbeat meeting with analysts.

Other tech winners included Bay Networks, up 3 3/8 to 37; Digital Equipment, up 4 7/8 to 65 7/8; Hewlett-Packard, up 3 to 96 3/4; and Cisco Systems, up 2 7/8 to 47.

Compaq, which triggered last Friday’s tech sell-off with computer price cuts, inched up 1/8 to 40 1/8.

* Biotech stocks also roared ahead. Analysts said investors are buying shares in some of the nation’s largest biotechnology companies following recent Food and Drug Administration product approvals and continuing optimism regarding drugs in development. Amgen soared 2 7/8 to 64 1/8, Biogen gained 3 1/4 to 71 1/8 and Chiron shot up 4 1/2 to 115.

* W.R. Grace jumped 9 to 77 5/8 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. Hercules lost 7/8 to 62.

* 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.

* Los Angeles-based Chantal dropped 1 1/8 to 6 5/8. Johnson & Johnson will today launch its anti-wrinkle cream, which will compete with Chantal’s main product.

* Among initial public offerings, Premiere Technologies, a provider of information and telecommunications services, rose 8 1/4 to 26 1/4.

In foreign trading, the Mexican stock market resumed its decline, with the Bolsa index down 23.06 points to 2,856.67.

In commodities trading, grain prices fell 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.