FINANCIAL MARKETS : Dow Gains 33 as IBM Soars; Yields Decline
A surge in IBM shares helped push blue-chip indexes higher Tuesday, but the broad market took a breather despite another decline in bond yields.
The Dow Jones industrial average ended up 33.96 points at 5,671.68 after Monday’s gain of 51 points. But much of the Dow’s advance was attributed to IBM, which soared 7 1/4 to 117 3/8 after brokerage Lehman Bros. issued an upbeat report on demand for IBM’s mainframe computers.
In the broad market, advancing issues had just a narrow edge over losers on the New York Stock Exchange. Most key stock indexes were up only modestly.
“Monday was mega-merger mania. Today it’s ‘Can’t get enough of IBM day’ on Wall Street,” said Marty Kearney, a trader at PTI Securities.
Investors stepped away from most stocks despite lower bond yields. The 30-year Treasury bond yield dipped to 6.59% from 6.64% Tuesday, even though the government reported that the leading economic indicators index for February rose 1.3%, the largest jump since January 1976.
The big gain was viewed as largely representing a snap-back from a weather-depressed January. Still, analysts say expectations for a pickup in economic growth are underpinning stocks.
The Federal Reserve Board’s three interest-rate cuts since last July “are beginning to have some effect and I think we’ll look through this corporate earnings period and to the next few quarters for some strength,” said Paul Rabbit, analyst at Oppenheimer & Co.
Meanwhile, gasoline futures prices rose to 68.20 cents a gallon during trading--highest price in more than four years--amid expectations record U.S. gasoline demand this summer will draw down already low inventories.
After the close of trading in New York energy futures, the American Petroleum Institute said U.S. crude supplies fell 1.4 million barrels to a 19-year low of 297.8 million barrels last week, while gasoline stocks dropped 2.8 million barrels to 203.6 million barrels-10 million barrels below year-ago levels.
Among Tuesday’s highlights:
* Telecommunications stocks were mixed in the wake of Monday’s big takeover deal between Pacific Telesis and SBC Communications. PacTel added 3/8 to 34 1/8 and SBC added 3/8 to 50 1/4. Among other telecom issues, BellAtlantic rose 1/2 to 63 5/8, Ameritech fell 7/8 to 56 1/4, Frontier lost 1 1/8 to 30 1/8 and AT&T; gained 1 1/8 to 63 3/8.
* Drug stocks were gainers, with Pfizer up 1 3/4 at 71 7/8, Eli Lilly up 1 to 66 3/8 and Warner Lambert up 2 5/8 to 108 3/4.
* IBM had little effect on other technology stocks. Digital Equipment rose 5/8 to 54 7/8, but Compaq eased 1/8 to 39, and Hewlett-Packard dropped 3/8 to 95 7/8. Dell Computer was unchanged at 35 5/8. Among new issues, Internet-related stock Lycos soared from an offering price of 16 to close at 21 15/16 on Nasdaq.
* Bally Entertainment rose 3 5/8 to 21 5/8 on rumors that it was in takeover talks with ITT. ITT and Bally declined comment. ITT rose 1 1/2 to 62 5/8. Other gaming stocks surged, including Mirage, up 2 to 47 3/4; MGM Grand, up 1 1/8 to 39 3/8; and Showboat, up 2 1/4 to 27 3/8.
* GM was off 1/2 at 55 5/8, retreating after leaping 2 7/8 Monday on its decision to spin off Electronic Data Systems to Class E shareholders.
