Cyclical Stocks Lead Rebound on Wall St.
Stocks roared back Monday, led by economically sensitive issues, as investors took Friday’s sharp sell-off as an opportunity to buy.
Competing interpretations of Friday’s employment report, which threw stocks into a tailspin, were reflected in the types of stocks that rose and fell Monday. Economically sensitive steel, aluminum and computer companies gained, while bank and utility stocks--those that get hurt when interest rates rise--dropped.
The Dow Jones industrial average ended up 110.55 points at 5,581,00, recouping much of Friday’s 171.24-point drop.
Bonds also recovered from Friday, although less dramatically than stocks, with the yield of the Treasury’s main 30-year bond closing at 6.63%, down from 6.72%.
The blue-chip index had a shaky morning, drifting lower at the opening, then quickly popping higher only to retreat about 25 points on a strong housing report. But it regained the lead in late morning and plowed steadily higher into the afternoon.
The Dow was high enough at 2:01 p.m. to prompt the New York Stock Exchange to restrict computer-guided buy programs, a move aimed at ensuring orderly markets. The so-called trading collar remained in place through the market’s close.
The Standard & Poor’s 500 index also bounced back, climbing 6.52 points to 640.02 after slumping 20.15 points on Friday. It didn’t regain as much ground as the Dow average, which is more heavily weighted with cyclical stocks that benefit from upswings in the economy.
Boeing, IBM and United Technologies led the Dow advance. The 30-stock average is now just 61 points from the record high set last Tuesday.
The Nasdaq composite index rallied 16.78 points to 1080.51, gaining back more than half of Friday’s losses. Netscape Communications led the charge, rising 6 1/4 to 46 1/4 after it signed a broad licensing agreement with America Online.
Friday’s market activity was triggered by news of a huge rise in U.S. employment in February. The surge in jobs turned around a bond market that until recently had been rallying on signs of a weaker economy, which many players thought would spur Federal Reserve Board policymakers to cut interest rates for a fourth time in eight months when they meet March 26.
But the Fed is expected to hold off until May or later. Lower rates help boost the value of fixed-rate securities already in circulation.
Bond market players are trying to determine a new range of prices and yields for fixed-income securities after last week’s tumultuous shift in the market.
Yields on three-month Treasury bills rose to 5.08% and six-month yields held at 5.18% Monday. One-year yields rose slightly to 5.37%.
Among market highlights:
* Among the economically sensitive cyclical stocks that rose were Alcoa was up 3 3/8 at 61 1/2, Caterpillar added 2 5/8 to 69 7/8 and DuPont was up 3 1/8 to 79 1/4. Paper company Georgia-Pacific gained 1 1/2 to 68 1/2.
* Interest-rate sensitive stocks that weakened included General Re, off 2 1/4 to 146 1/4 and BankAmerica, down 1 3/4 at 71 3/4. The Dow Jones utilities average dropped 0.56 point to 215.69 after being down as much as 212.55--its lowest intraday level since it was 212.23 points on Nov. 15.
Peco Energy fell 1/2 to 27 1/8, DTE Energy slid 1/8 to 34 7/8 and Pacific Gas & Electric dropped 1/8 to 25 1/2.
* Stronger technology issues included IBM, up 3 1/2 to 117 1/4, Hewlett-Packard, up 4 3/4 to 95 1/8 and Intel, up 1 3/4 to 55 1/4.
* UAL, parent of United Airlines, rose 3 7/8 to 185 5/8 after the carrier forecast a large rise in traffic growth this year.
* Xerox rose 2 5/8 to 129 3/8 on news it is launching a new unit to sell image technology.
Most commodity markets, including gold, exhibited little reaction to the rebound in stocks Monday.
But cocoa prices fell sharply Monday as traders gave a skeptical hearing to a promise by leading producer Ivory Coast to withhold supplies from the depressed market.
The West African country’s minister of commodities said its cocoa output is not that large and it would withhold off-season supplies from the market. May cocoa declined $9 to $1,240 per metric ton, after earlier reaching a high of $1,260.
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
