Stocks Rise on Bond Rally, Bargain Hunting in Techs
A late rally that sent long-term Treasury bond yields below 7% and some bargain hunting among depressed technology shares lifted most of the stock market Thursday.
But the tone remained cautious as money managers tried to give portfolios a quarter-ending polish and investors braced for what could be surprises in the key economic data to be released next week and for the Federal Reserve Board meeting on inflation and interest-rate policy.
The Dow Jones industrial average fell 5.17 points to 5,677.53, recovering from a midafternoon slide of 36 points as bond prices jumped higher, sending long-term interest rates below 7% for the first time in three weeks.
Broader measures of larger-company stocks also rebounded as the 30-year Treasury bond rallied, sending its yield--a key determinant of corporate and consumer borrowing costs--to 6.99%. Two weeks ago, the yield surged to 7.20% amid growing fears of higher inflation, which makes bonds and their fixed rates of return less enticing.
“The sun came out [in the bond market] and stocks rallied too,” said Robert Streed, senior investment advisor at Northern Trust in Chicago. “These are just excellent values in the bond market.”
The Nasdaq market was stronger from the start of the session as bargain hunters took advantage of Wednesday’s 19-point tumble, which depressed prices on many big technology names.
A series of cautious profit outlooks in the computer industry has spurred several rounds profit-taking on the powerful rally the sector had this past spring. Since hitting the record high of 1,249.15 on June 5, the Nasdaq composite index has lost 6.8% of its value.
On Thursday, the Nasdaq composite rose 12.72 points to 1,166.01, helped by big rebounds in computer-related issues such as Dell Computer, up 2 3/4 at 48 1/2; Iomega, up 6 1/2 at 27 1/2; and U.S. Robotics, up 7 at 84 3/4.
The rebound in technology and more speculative issues was not apparent in the struggling American Stock Market, whose market value index fell 5.50 points to 570.13, its lowest level since April 11. The Amex is now down 7.3% since achieving its record high of 614.99 on May 22.
Advancing issues outnumbered decliners by a 9-7 margin on the New York Stock Exchange, where volume totaled 405.21 million shares as of 4 p.m., up from 386.48 million for the previous session.
The NYSE composite index rose 1.71 points to 357.58, and the Standard & Poor’s 500-stock index rose 4.16 points to 668.55. Both indexes had been lower until midafternoon.
The Labor Department reported Thursday morning that the number of Americans filing first-time claims for unemployment benefits fell last week, but the level was nevertheless one that economists said indicates slower job growth.
The weekly jobless benefits report generally incites less reaction than the monthly tally, which is due next Friday. The monthly reports have indicated strong employment growth recently, fueling worries that increasingly strong consumer spending power would result in rapidly rising demand and therefore inflation.
Analysts’ opinions are divided over whether Fed policymakers, who will meet Tuesday and Wednesday, will decide to raise interest rates in a preemptive strike against inflation. Higher interest rates can hurt corporate profits by raising borrowing costs and slowing revenue growth.
Among Thursday’s market highlights:
* Procter & Gamble fell 2 1/4 to 91 1/4. The conglomerate said it is selling its 50% stake in a U.S. venture with the Swiss drug firm Roche Holding to Roche. P&G; said it will report an after-tax gain of $120 million on the sale, which includes ownership of Aleve pain reliever.
* Chemical maker Union Carbide lost 2 1/4 to 40 3/8 after it reportedly issued a cautious second-quarter assessment to analysts.
* Quaker Oats fell 2 to 33 3/4. It announced Wednesday that it had reduced the price of most of its boxed cereals an average of 15%.
* Ivax plummeted 8 5/8 to 15 1/4. The nation’s biggest generic drug maker said it expects its second-quarter earnings to fall “significantly short” of those of recent periods because of price cuts and a sluggish reorder pace.
The news had a ripple effect for others who sell generic drugs. Teva Pharmaceutical Industries fell 3 1/4 to 34 1/2, Watson Pharmaceuticals lost 1 3/4 to 38 and Alpharma was down 1 1/2 to 19 5/8.
Overseas, Tokyo’s Nikkei-225 stock average fell 0.7%, Frankfurt’s DAX index fell 0.9% and London’s FTSE-100 fell 0.5%.
Wheat prices fell sharply after China rejected a second cargo of U.S. wheat this month on allegations that it contained the TCK fungus. July soft red winter wheat closed down 14 cents at $4.78 1/2 per bushel on the Chicago Board of Trade.
Crude oil prices rose for a second consecutive session at the New York Mercantile Exchange, lifted by bullish technical signals and continued concerns about Middle East supplies. August crude oil set a contract high of $21.30 on Thursday but closed at $21.02, up 37 cents.
Market Roundup, D7
