Techs Give Dow the Juice to Pass 5,700; Yields Up
Rebounding technology shares helped turn the stock market higher Wednesday, bringing the Dow Jones industrial average to its first close above 5,700 since July’s rout.
The industrials rose 22.56 points to 5,718.67, their sixth gain in seven sessions, bringing the average within 60 points, or less than 1%, of its all-time high of 5,778.00, set May 22.
It was just over a month ago that the Dow started sliding with the rest of the market on interest rate and corporate profit worries, a downturn that dragged the Dow below 5,200 in mid-July. Broader market measures have recovered too, but not as decisively as the 30 Dow stocks, with investors favoring the perceived safety of big companies as they edged back into the market.
The leadership came from the battered computer sector, which benefited from a Merrill Lynch upgrade on a leading chip maker, Micron Technology, and an upbeat outlook in advance of a widely-watched report on monthly semiconductor sales. Micron soared 3 5/8 to 25 7/8.
“The market’s going higher,” said Peter Canelo, chief investment strategist and chairman of investment policy at Dean Witter Reynolds. “Earnings are great, bonds are up. The Fed’s not going to do anything” to raise rates.
Canelo bases his optimism on an assessment that corporate earnings are in no danger of sliding. In the second quarter, operating earnings for companies in the S&P; 500 grew by about 8.7%, far better than the 6.5% growth that had been projected, he said.
Against that favorable backdrop, the Dow industrials are poised to rise beyond May’s record of 5778, Canelo said. “With yields coming down to 6.6% on the long bond, that should carry the market up to 6,000.”
Wednesday, the Dow and broader big-company measures bounced back in the last hour after surrendering early gains.
The Standard & Poor’s 500-stock index rose 1.78 to 664.16, leaving it within 15 points of its record high, and the New York Stock Exchange composite index rose 0.78 to 354.43, less than 10 points from its all-time best.
Advancing issues outnumbered decliners by a 13-to-9 margin on the NYSE, where volume totaled 392.47 million shares as of 4 p.m., up from the previous session.
The Nasdaq composite index rose 12.24 to 1,141.11, and the American Stock Exchange’s market value index, which is also dominated by technology and smaller-company shares, rose 1.50 to 550.24.
Despite the improving interest in computer-related shares, the Nasdaq market remains 8.6% below its June record, demonstrating the reluctance among investors to go plowing back into that technology sector after July’s slide. The buying in technology has been focused on bellwether names which are perceived to be less risky.
IBM shares jumped 3 3/8 to 112 5/8 on the NYSE, accounting for nearly half of the Dow’s advance; Hewlett-Packard rose 1 7/8 to 46, and Compaq rose 1 1/4 to 57.
Among other chip makers: Texas Instruments rose 3 to 48 1/2; Motorola rose 1 3/4 to 57 1/4; Intel rose 2 31/64 to 82 23/64, and Applied Materials rose 2 5/16 to 27 7/16.
There was little market reaction to a report that reinforced last week’s encouraging signals on inflation. The Federal Reserve’s survey of regional business conditions found that the robust U.S. economy is showing signs of slower growth. The survey, known as the “beige book,” will be used by Fed policy-makers when they meet Aug. 20.
The yield of the Treasury’s main 30-year bond was up, to 6.77% from 6.75% on Tuesday.
Among market highlights:
* Oil stocks weakened as crude oil prices fell on news that the United States approved procedures in monitoring the United Nations-Iraq oil-for-food plan. Mobil fell 2 1/2 to 110 5/8 and Chevron lost 1 1/8 to 58 3/8.
* First Union lost 1 3/8 to 64. Banco Santander sold a 3.6 million share block of stock in First Union, reducing its stake to just under 10%.
* Comshare slumped 6 7/8 to 11 5/8 after warning that results for the fourth quarter ended June 30 would fall short of expectations. Comshare is delaying the release of quarter and year-end results pending completion of an audit.
* Amylin Pharmaceuticals surged 4 7/8 to 13 5/8 on the news that phase II trials of its diabetes drug candidate, pramlintide, was found to be effective in lowering patients’ glucose levels.
Overseas, Tokyo’s Nikkei stock average fell 1.3%, Frankfurt’s DAX index rose 0.4%, and London’s FTSE-100 rose 0.6%.
Market Roundup, D5
