Cyclical Stocks Lead Rebound on Wall St.
Chemical, technology, transportation and other economically sensitive stocks led Monday’s buying binge on Wall Street, as the Dow Jones industrial average recovered almost two-thirds of Friday’s harrowing 3% loss.
The broad market also gained with the Dow, which soared 110.55 points, or 2%, to 5,581.00, after plunging 171.24 points Friday in tandem with a bond market sell-off.
On the Big Board, winners topped losers by 1,588 to 907 in active trading, and most key indexes rose, although not as powerfully as the Dow.
But even as long-term bond yields eased slightly Monday after Friday’s surge, many interest-rate-sensitive stocks such as banks and utilities failed to rally. That, some analysts suggested, could portend more trouble for the stock market in the weeks ahead.
In the bond market, where long-term yields had soared a third of a percentage point Friday in the wake of a stronger-than-expected February U.S. employment report, Monday brought an initial further jump in yields, then a modest decline.
The Treasury’s main 30-year bond yield ended at 6.63%, down from 6.72% on Friday and from 6.77% early Monday.
Intermediate-term yields fell less convincingly. The five-year T-note yield, for example, dipped only to 6.01% from 6.07% on Friday. And the yield on three-month T-bills auctioned Monday rose, to 5.08% from 5.02% on Friday.
Still, some analysts said bonds’ performance was impressive, especially given the news Monday of a jump in new-home sales in January.
While the report showed that home sales rose more than expected, it came as “a relief to the market that it doesn’t show any of the kind of extraordinary deviance” that Friday’s employment statistics did, said Robert McGee, chief economist at Tokai Bank in New York.
The housing report is “consistent with the idea that housing remains at a pretty good level, but it’s not going to add anything to economic growth,” McGee said.
Fears of robust economic growth caused a mini-crash in the bond market Friday and appeared to sharply reduce chances that the Federal Reserve Board will cut short-term interest rates soon.
That caused a knee-jerk reaction in stocks Friday. But by midday Monday, investors were translating the good news for the economy into expectations for stronger corporate profits, analysts said.
Although stock prices had a shaky morning, drifting lower at the opening, they began to rise briskly by late morning as bond yields pulled back. The Dow, up 50 points in midafternoon, accelerated from there to the close.
“A powerful bull market doesn’t stop dead in its tracks and become a bear,” said Larry Wachtel, analyst at Prudential Securities. “Money came in from the sidelines when the opening was no big deal and then it was an opportunity to step up to the plate.”
Even so, analysts warned that profit takers could easily grab control of the market again soon. With the Dow just 61 points from its record, while interest rates are significantly higher than they were a week ago, stocks are particularly vulnerable to outside shocks--such as an escalation of tensions between the United States and China, experts said.
Among Monday’s highlights:
* The Nasdaq composite index of mostly smaller stocks rallied 16.77 points, or 1.6%, to 1,080.50, gaining back more than half of Friday’s loss. Netscape Communications led the charge, rising 6 1/4 to 46 1/4 after it signed a broad licensing agreement with America Online, which added 4 3/8 to 48 3/8.
Technology stocks in general were higher, as investors snapped up issues that would benefit from a stronger economy. Intel rose 1 3/4 to 55 1/4, Hewlett-Packard jumped 4 5/8 to 95 1/8, IBM gained 3 to 117 1/4 and Cybercash surged 7 1/4 to 39 1/4.
* Industrial issues helping to lift the Dow included Alcoa, up 3 3/8 to 61 1/2; DuPont, up 3 to 79 1/4; Caterpillar, up 2 5/8 to 69 7/8; and Union Carbide, which gained 2 3/8 to 47 5/8.
* Transportation stocks also surged. The Dow transports index leaped 2.8% to 2,095.25.
* On the downside, utilities and banks were mostly lower, failing to respond to bonds’ rally. The Dow utility index eased 0.56 point to 215.69 after trading as low as 212.55--its lowest intraday level since Nov. 15.
In foreign trading, Latin American markets rebounded with U.S. shares, while European markets closed mostly lower.
Market Roundup, D8
* MAIN STORY. A1
* STRONGER ECONOMY?: New home sales in January were stronger than expected. D2
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Climbing Back
Dow Jones industrial average, half-hour closes:
Close: 5,581.00
