Yields’ Drop Helps Stocks; Dow Gains 31
Heartened by a modest bond market rally and some decent second-quarter corporate earnings reports, stock investors resumed buying Tuesday.
The Dow Jones industrial average gained 31.03 points to 5,581.86. In the four previous sessions, Wall Street’s best-known indicator had tumbled 179.15 points, or 3%.
In the broad market, advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange.
But most key indexes lagged the Dow’s gain. And the Russell 2,000 index of smaller stocks edged down for the day, losing 0.24 point to 336.44.
The market’s weakness in recent days has been spurred by fears that the economy was speeding ahead too fast and that the Federal Reserve Board was about to boost consumer and business lending rates to slow it down as a way to forestall a resurgence in inflation.
Investors have largely taken their cues from the Treasury bond market over the last few sessions. Interest rates spiked upward Friday after a June employment report showed much stronger job growth than economists predicted.
On Tuesday, however, the bond market rallied modestly, sending yields down. A well-received auction of 10-year Treasury notes helped the mood. The new notes sold for an average yield of 7.02%.
The yield on the Treasury’s main 30-year bond fell to 7.12% from 7.19% on Monday.
Many analysts say the key to the market’s performance in the near term will be earnings reports.’
“There’s going to be a lot of good companies that will report solid earnings this quarter,” said Thomas Keresey, chairman of Palm Beach Investment Advisers Inc., which has $200 million in assets. “The second quarter may be the best quarter” for earnings this year.
Among Tuesday’s highlights:
* A strong earnings report from Nike sent its shares up 4 1/2 to 108 3/4. Likewise, International Paper shares rose 1 5/8 to 39 1/8 after reporting better-than-expected earnings.
* Other industrial stocks rising included Georgia-Pacific, up 2 to 72 1/8; Sundstrand, up 1 1/4 to 37 7/8; and Goodyear, up 1 1/8 to 48.
But after the market closed, Motorola reported sharply lower earnings, possibly setting the stage for fresh selling of tech stocks today. Motorola fell 1 1/4 to 66 1/2 in regular trading, then plunged to 60 1/2 in after-hours trading.
* Even before the Motorola report, other semiconductor shares fell after earnings estimates were cut for three chip makers and two equipment companies. LSI Logic slid 2 to 21 1/2, Texas Instruments dropped 3/8 to 49 3/8 and VLSI Technology slipped 1/4 to 12 5/8.
* Hewlett-Packard was down 4 to 87 1/8 after the company announced a cut in prices of some of its notebook computers and some analysts lowered earnings estimate.
* Shares of some health maintenance organizations fell after Mid-Atlantic Medical Services said it would lose between 5 cents and 10 cents a share in the second quarter due to higher claims. Mid-Atlantic fell 1/2 to 13 3/4. Much bigger United Healthcare lost 2 1/2 to 45 5/8.
Most foreign markets closed higher. Mexico City’s Bolsa broke a four-session losing streak to rise 50.83 points; London’s FTSE-100 was up 10.8 points; Frankfurt’s DAX rose 11.4 points.
Market Roundup, D5
