Dow Jumps 87 as Yields Slide
U.S. stocks surged Thursday for a second straight session as buyers gained more conviction amid tumbling bond yields.
The Dow Jones industrials rocketed 87.30 points, or 1.6%, to 5,464.18 in a broad rally fueled in large part by soothing comments from Federal Reserve Board Chairman Alan Greenspan.
In testimony before Congress, Greenspan strongly hinted that the Fed doesn’t yet feel a compelling need to tighten credit. Instead, he said the Fed expects the U.S. economy to slow enough in coming months to diminish inflationary pressures.
Greenspan’s comments were a relief to bond traders, who quickly pushed short- and long-term yields lower. The benchmark 30-year Treasury bond yield slid from 7.02% Wednesday to 6.92%, the lowest since July 1.
At the Treasury’s auction of one-year bills, the average yield of 5.81% was the lowest in nearly two months. The yield on existing one-year T-bills, meanwhile, fell to 5.73%. It has been trending lower since peaking at 5.97% on July 8, in the aftermath of the surprisingly strong June employment report that spooked bond investors.
If investors were convinced on July 8 that the Fed would soon tighten credit, “The perception now [after Greenspan’s remarks] is that the Fed won’t do anything immediately,” said Eugene Peroni, analyst at brokerage Janney, Montgomery Scott.
That helped give stock investors more of an excuse to buy, in the wake of the steep plunge in prices over the past two weeks.
The Nasdaq composite index of mostly smaller stocks jumped 23.17 points, or 2.1%, to 1,109.82, adding to Wednesday’s 3.2% surge.
Rising stocks outnumbered losers by nearly 3 to 1 on the New York Stock Exchange, but the margin was less than 2 to 1 on Nasdaq. Trading continued to wane from Tuesday’s record levels, as 474 million shares changed hands on the NYSE.
Stocks’ recent slump, which culminated in a furious selloff then partial recovery on Tuesday, had been fueled by worries about higher interest rates and disappointing corporate profits. Even as Greenspan eased rate fears on Thursday, some robust earnings reports also helped buoy investors’ mood.
Still, the Dow remains 5.4% below its 1996 peak and the Nasdaq composite remains 11.6% below its peak. Both indexes, however, had been down about double those amounts, respectively, at the market’s lows midday Tuesday.
Among Thursday’s highlights:
* Many technology issues continued to rebound from heavy selling over the past two weeks. Apple Computer roared ahead 4 to 20 7/8 after reporting better-than-expected quarterly earnings.
Other big gainers included Adobe Systems, up 3 3/4 to 35 1/4; Microsoft, up 2 3/4 to 119 7/8; Cabletron Systems, up 2 3/4 to 64 1/4; Computer Sciences, up 2 1/4 to 69 7/8; and Cybercash, up 5 to 43 1/4.
Sun Microsystems jumped 3 7/16 to 58 7/16 and Netscape Communications rocketed 5 3/16 to 56 1/2, but after the market closed both reported earnings below expectations.
* Stocks gaining on healthy earnings reports included Merck, up 1 5/8 to 64 3/8; Gillette, up 1 3/8 to 60 1/2; PPG Industries, up 1 3/4 to 46 3/4; CSX, up 1 3/8 to 47 1/8; and BDM International, up 3 to 51 1/2.
But AT&T; fell 2 1/4 to 54 1/8 on its earnings report.
* Bank stocks were mostly higher as interest rates fell. NationsBank rose 1 1/4 to 81 7/8, First Chicago NBD gained 1 1/8 to 39 1/2, Citicorp shot up 3 1/8 to 81 7/8 and BankAmerica jumped 2 to 78 7/8. But Wells Fargo was off 1 1/8 to 220 1/8.
* Biotech stocks were up sharply. Industry leader Amgen, which after the close of trading reported earnings well above expectations, rose 1 to 55 3/8 in regular trading and jumped to 58 after hours. Biogen soared 2 3/4 to 57 3/4 and Chiron leaped 3 1/2 to 88 1/2.
* Entertainment issues rallied. Viacom class B jumped 2 3/8 to 36 3/8, Time Warner added 1/2 to 37 1/8 and Disney gained 1 1/4 to 57 1/4.
* Airline stocks were mostly lower in the wake of the crash of a TWA jetliner off Long Island. TWA dropped 1 to 10 1/4 on the Amex. Also falling were Continental Airlines class A, down 1 1/8 to 24; Delta, down 1/2 to 74 7/8; and USAir, down 3/8 to 16 5/8.
In foreign trading, most major markets continued to rebound with Wall Street. Mexico’s Bolsa index leaped 73.92 points, or 2.5%, to 3,064.19.
In currency trading, the dollar slipped to 108.46 yen in New York from 108.68 Wednesday on fresh rumors of higher Japanese interest rates.
* TELLING TESTIMONY
Fed chief suggests agency won’t raise interest rates. A1
