FINANCIAL MARKETS : Bond Rally Powers Dow to Near-Record
Blue chip stocks caught up with the rest of the market Friday, flirting with a record high for the first time since early April as interest-rate worries continued to abate.
The Dow Jones industrials rose 52.45 points to 5,687.50--just shy of the blue-chip barometer’s all-time high of 5,689.74 set April 3.
Broader indexes of big-name stocks also surged, outpacing small-stock indexes that have led the market for the past two months. Winners swamped losers by 15 to 9 on the New York Stock Exchange in moderate trading.
Stocks’ rally was stoked by a fresh decline in long-term bond yields, after the University of Michigan’s closely watched U.S. consumer confidence index registered an unexpected decline for May--hinting that the economy’s recent strength may not continue.
That made it even more unlikely that the Federal Reserve Board will tighten credit soon, experts said. The Fed meets Tuesday.
Bond yields fell sharply in the morning, and the rally held in the afternoon. The 30-year Treasury bond yield dropped from 6.92% Thursday to 6.83% Friday, the lowest since April 26.
The Treasury bond market also was helped as investors digested the record $3.5 billion corporate bond offering from Lockheed Martin. That issue’s debut on Thursday had temporarily depressed demand for Treasury securities.
In the stock market Friday most indexes again reached record highs. The Standard & Poor’s 500 index gained 4.06 points to 668.91. The Nasdaq composite index of mostly smaller stocks added 2.57 points to 1,241.88.
The day’s surprise was that blue chips were back in demand in a big way, while smaller stocks lagged. Traders said some investors were simply hunting for issues that have been beaten down, and found numerous blue chips fit that bill.
Others suggested foreign investors were buying blue chips. “Foreigners are coming into our market . . . and they’re buying big name-brand companies they’re comfortable with,” said Edward Keely, portfolio manager at Founders Asset Management.
The Dow was led higher by Philip Morris, up 4 to 95 1/2; Merck, up 1 1/2 to 63 5/8; IBM, up 2 1/4 to 110 7/8; GE, up 1 3/8 to 81 1/4; and Dupont, up 1 3/8 to 81 3/8.
For the week, the Dow was up 169.36 points, or 3.1%. That brought its gains to nearly 350 points, or 6.5%, from a steep sell-off less than two weeks ago.
Some analysts say there is no sign that the stock market will be stopped any time soon, provided that the economy remains on an even keel and interest rates hold steady or decline.
“If [bond yields] stay under 7%, the market can go higher,” said Joe Battipaglia, market strategist at Gruntal & Co. in New York.
Market Roundup D4
