Stocks Shrug Off Tobacco Sting and Resume Climb
Stocks ended higher Monday despite weakness in tobacco company shares in one of the slowest sessions of the year. A series of utility merger announcements were considered good news, a sign that some stocks are not considered overpriced.
The Dow Jones industrial average rose 23.67 points to 5,704.98, after falling as much as 33 points earlier in the session. Broad-market indexes were mostly higher after spending most of the session with narrow losses.
Many investors held to the sidelines as they awaited this week’s economic data, worried that after Friday’s yawn at another encouraging inflation report there may be more downside risk than upside potential.
“This market is directionless and lacks conviction,” said Brian Belski, a technical analyst at Dain Bosworth in Minneapolis, noting how Friday’s jury damage award against Brown & Williamson Tobacco Corp. overshadowed a tame inflation report that sent interest rates lower in the bond market. “People are looking for a reason to sell and lock in that return.”
Bonds were stable Monday. The Treasury’s 30-year yield ended at 6.68%, down 0.01%.
Advancing issues outnumbered decliners by more than a 6-5 margin on the New York Stock Exchange, where volume totaled a sleepy 312.16 million shares, down from Friday’s pace.
Philip Morris, one of the 30 stocks in the Dow average, was the most active issue on the NYSE. Late Friday, a Florida jury awarded a smoker $750,000 in a liability case against another tobacco company. Some investors and sources were confused about Philip Morris’ price because trading was stopped Friday afternoon on the NYSE after it fell 3 1/2 to 102, but it fell 14 5/8 to 90 7/8 in later trading on other markets. It ended Monday’s trading at 93 3/8. Excluding Philip Morris, the Dow would have been up nearly 50 points.
The other major market movers Monday were utilities. Gas stocks surged after Houston Industries agreed to buy natural gas company NorAm Energy for $3.8 billion in stock, cash and debt. Also, Delmarva Power & Light agreed to buy Atlantic Energy for about $951 million in stocks.
NorAm jumped 3 to 14 5/8 and Houston Industries fell 3/4 to 22 7/8; Atlantic Energy rose 7/8 to 18 and Delmarva advanced 3/8 to 21.
Natural gas stocks, which had climbed since Enron agreed to buy Portland General on July 22, were the day’s biggest gainers in the Standard & Poor’s 500 index.
Williams and PanEnergy rallied after a report that Cinergy, the electric utility in Cincinnati, was holding separate merger talks with the two companies.
Williams jumped 1 5/8 to 49 3/4, PanEnergy added 3/4 to 33 5/8 and Columbia Gas System leaped 2 1/8 to 56 3/4.
Among Monday’s highlights:
* The Dow’s strongest issues were consumer stocks. Merck rose 1 7/8 to 69 3/8, Disney rose 1 3/8 to 58 1/2, General Electric rose 1 1/4 to 85, Procter & Gamble rose 1 to 88 3/4 and Coca-Cola rose 1 to 49 3/4.
* First Brands lost 2 5/8 to 22 3/8. Buckingham Research cut the stock to “hold” from “buy” on expected competition from Rubbermaid’s entry into the trash bag business. Rubbermaid rose 1/8 to 28 3/8.
Overseas, Tokyo’s Nikkei stock average rose 0.6%, Frankfurt’s DAX index rose 0.1%, and London’s FTSE-100 fell 0.2%.
The most significant economic reports this week could be today’s readings on July’s retail sales and inflation at the consumer level. Investors are looking for those figures to reinforce recent signals that inflationary pressures remain mild and that the Federal Reserve Board won’t need to make an economy-slowing interest rate hike at its next policy-setting meeting. Inflation hurts the value of fixed-income investments such as bonds, and the resulting increases in interest rates can hurt stocks by raising corporate borrowing costs and slowing consumer spending.
Market Roundup, D8
