Nasdaq Hits Record High; Dow Retreats
The U.S. stock market closed mixed but mostly higher Friday, with small-company stocks again asserting leadership as blue-chip issues faded.
Meanwhile, long-term bond yields fell for the first time all week, despite a heavy calendar of new notes to be auctioned next week by the Treasury.
On Wall Street the Dow Jones industrials fell 16.26 points to 5,535.48, as sellers continued to chip away at many blue chips.
But winners topped losers by 14 to 9 on the New York Stock Exchange and by 19 to 18 on the Nasdaq market, and most measures of small-stock performance gained for the day. The Nasdaq composite index rose 2.40 points to a record 1,138.70 and the Russell 2,000 index added 1.05 points to a record 338.51.
Two new Nasdaq stock offerings--Planet Hollywood and CompuServe--dominated trading activity, swelling Nasdaq volume.
But analysts said the continued gains in smaller issues overall reflect many investors’ faith in the U.S. economy’s health. Smaller companies tend to be more focused on the domestic economy, which has surprised many analysts this year with its resilience.
At the same time, blue-chip multinational stocks have receded in part because of the strong dollar, which can reduce the companies’ profit gains overseas and also make their products less competitive in foreign markets.
For the week the Dow industrials were virtually unchanged, adding less than 3 points. In contrast the Nasdaq composite gained 37.76 points, or 3.4%. Year-to-date the Dow is up 8.18% while the Nasdaq index is up 8.23%.
The dollar rallied again Friday on the heels of Germany’s surprise interest-rate cut on Thursday, and in advance of Western finance ministers’ meetings this weekend in Washington.
The dollar closed at 1.5120 German marks, up from 1.5015 Thursday, and at 107.36 Japanese yen, up from 106.65.
In the U.S. bond market yields declined, perhaps getting help from falling European bond yields after Germany cut short-term rates Thursday. The 30-year U.S. Treasury bond yield dipped to 6.79% from 6.83% on Thursday. A week ago the yield was 6.80%.
The bond market, which has been riled since February by stronger U.S. economic growth, faces another test next week, when the Treasury sells $18.75 billion of two-year notes on Tuesday and $12.5 billion of five-year notes on Wednesday. The two-year note yield was 5.93% Friday; the five-year was 6.31%.
For the stock market, reasonably healthy first-quarter corporate earnings reports this week helped underpin prices, analysts said. Despite IBM’s warning at mid-week about lower profit margins ahead, which helped depress blue chips, “overall the tone of earnings was better than expected,” said Jay Meagrow, a trader at McDonald & Co.
Among Friday’s highlights:
* Microsoft’s bullish earnings report pushed its shares as high as 112 1/8, but they fell back to close up 3/4 at 109 3/4, still a record closing high.
Other stocks gaining on earnings news included data storage firm Iomega, up 2 55/64 to 37 1/8; PPG Industries, up 2 to 51 1/2; brokerage Alex. Brown, up 1 7/8 to 50 1/8; and Liz Claiborne, up 1 1/8 to 37.
But EMC fell 1 3/4 to 18 1/2 after reporting flat earnings.
* Among smaller issues helping to boost the Nasdaq market were Pure Software, up 4 3/4 to 41; Redhook Ale, up 5/8 to 23 1/4; Uunet, up 5 1/4 to 44 1/2; and Veterinary Centers of America, up 1 to 28 7/8.
* Newspaper stocks jumped after brokerage First Boston upgraded them. Tribune surged 3 1/2 to 70, Gannett gained 2 7/8 to 68 3/8 and Times Mirror, parent of the Times, rose 1 1/8 to 39 1/4.
* AMR topped the NYSE actives list, losing 2 1/2 to 90 7/8. The parent of American Airlines said it will redeem its $1.02 billion of 6 1/8% convertible subordinated debt on May 20, offering holders the right to convert the bonds into stock.
In foreign trading the bullish 1996 trend continued, with London and Mexico City shares hitting record highs and stocks advancing strongly in Buenos Aires, Seoul and Sao Paulo.
Market Roundup, D3
