Dow Springs to Life With Late Rally, Rising 75
Blue-chip stocks soared in a late-afternoon rally Monday, kicking off the third quarter on an upbeat note ahead of today’s Federal Reserve Board meeting.
The Dow Jones industrial average surged 75.35 points, or 1.3%, to 5,729.98, its best one-day gain since a 98-point surge on March 18.
The broad market wasn’t as strong, but most stock indexes closed solidly higher in fairly active trading for a summer Monday.
The Nasdaq composite index of smaller stocks continued to rebound from its recent pummeling, adding 12.43 points, or 1.1%, to 1,197.45.
Stocks opened the day higher, as the latest data on the economy presented a mixed picture of business activity. The government said consumer spending was robust in May, but another report showed that construction spending fell.
Meanwhile, the National Assn. of Purchasing Management’s report on June manufacturing activity was surprisingly strong.
Still, many analysts believe that the Fed, meeting today and Wednesday, will give the economy the benefit of the doubt and refrain from raising short-term interest rates.
Indeed, the bond market rallied powerfully last week in advance of the Fed meeting. And on Monday, despite the economic reports, bond yields edged up only modestly.
The 30-year Treasury bond yield rose to 6.91% from 6.89% Friday.
On Wall Street, the stock market got support Monday not only from the sedate bond market but from another flurry of corporate takeover announcements, and from general bargain-hunting in the wake of the June sell-off, which hit smaller stocks particularly hard.
“A lot of the bulls are back in high-tech stocks,” noted Larry Rice, director of research at Josephthal, Lyon & Ross.
On the New York Stock Exchange, winners topped losers by 14 to 10. Winners had a narrower 21 to 17 edge over losers on Nasdaq.
Traders said many portfolio managers appeared to be in a buying mood again, after the end-of-quarter portfolio “window dressing” of recent weeks.
“The market’s very happy with [the backdrop], not least of which is that the Fed seems less likely to do anything this week,” said Joe Battipaglia, market strategist at Gruntal & Co.
Among Monday’s highlights:
* Economy-sensitive stocks in the Dow led the charge, which some traders said may have stemmed from optimism about industrial earnings in the wake of the May manufacturing-sector data from the purchasing managers.
DuPont soared 3 to 82 1/8, GM gained 2 to 54 3/8, 3M surged 2 3/8 to 71 3/8 and Caterpillar was up 2 1/4 to 70. The Dow’s gain put it within striking distance of its record 5,778.00 reached on May 22.
* Tech stocks rallied, helped by Merrill Lynch’s optimistic comments about leading semiconductor stocks. Intel jumped 1 11/16 to 75 1/8 and Motorola leaped 1 3/4 to 64 1/2.
Other tech winners included IBM, up 2 1/2 to 101 1/2; Cisco Systems, up 1 3/4 to 58 3/8; and Microsoft, up 1 3/16 to 122 5/16.
* In the takeover arena, ADT soared 3 7/8 to 24 1/8 after the company agreed to be bought by Republic Industries in a deal valued at $5 billion. ADT will become a wholly owned unit of Republic. Republic fell 2 3/8 to 26 3/4.
Also, reinsurance firm General Re, which agreed to buy National Re for about 53 a share in cash or stock, rose 2 1/4 to 154 1/2, while National Re rocketed 13 5/8 to 51 3/8.
* Railroad stocks were bolstered by speculation that the government will give a green light to the proposed $5.4-billion merger of Union Pacific Railroad and Southern Pacific Rail, clearing the way for other deals in the industry, analysts said. The Dow Jones transportation index rose 1.5%.
In foreign trading, Mexican stocks closed lower, driven down sharply in early trade as investors reacted to news that a new armed rebel group appeared over the weekend in the southwestern state of Guerrero.
The Bolsa index of 37 leading stocks closed down 33.18 points, or 1.03%, at 3,177.65.
In commodities trading, corn futures prices advanced to record highs in Chicago amid growing concern about dwindling stockpiles, reported in early June at the lowest level for that date in 21 years.
Market Roundup, D8
