Tech Rally Boosts Stocks; Yields Steady
Stocks recouped some of the previous session’s steep losses Wednesday as Dell Computer’s strong earnings report sparked a rally in personal computer makers and other high-technology issues.
The Dow Jones industrial average rose 19.60 points to 5,666.88 after falling 57.70 points on Tuesday. In the broader market, advancing issues beat decliners 1,418 to 875 on relatively light New York Stock Exchange volume of 343.47 million shares.
“Dell got the techs going this morning. . . . The market is in good shape but not over-enthusiastic one way or another,” said Kenneth Ducey, director of trading at BT Brokerage.
The Nasdaq composite index, heavily weighted with high-tech stocks, rose 7.36 points to 1,133.51, a gain nearly twice that of the 30-share Dow industrials on a percentage basis.
Stocks and bonds were battered Tuesday after reports of stronger-than-expected increases in consumer prices and retail sales in July rekindled worries about inflation.
On Wednesday, the bond market was stable and closed little changed. The yield on the key 30-year bond fell to 6.78% from 6.79%.
After the market closed Tuesday, Dell said second-quarter earnings jumped 58% to $103 million, or $1.05 a share. Its share price jumped 4 1/8 points to 60 3/4 on Wednesday. Analysts had forecast earnings of 86 cents a share, according to First Call, which tracks estimates. Two brokerages, Cowen & Co. and Lehman Bros., raised their ratings on Dell.
Shares of other PC makers also rose. Compaq Computer added 1 7/8 to 58 1/8, Gateway 2000 rose 2 1/4 to 42 and International Business Machines, which makes mainframes and software as well as PCs, added 1 7/8 to 111 1/4.
“This market has got an upward bias if interest rates can stay flat or move down,” said Richard E. Cripps, chief market strategist for Legg Mason. “We have a window before we start to get concerned about third-quarter earnings in the latter part of September.”
Among Wednesday’s highlights:
* Philip Morris recovered some ground, adding 1 to 91. The stock has lost more than 15 points since a Florida jury last week awarded a cancer victim $750,000 in a product liability case against Brown & Williamson Tobacco.
* American Re surged 4 1/2 to 62 7/8 after the company agreed to merge with Germany’s Munich Re in a $3.3-billion deal.
* Sports Authority added 2 7/8 to 21 7/8 after reporting stronger second-quarter results. Alex. Brown and Lazard Freres upgraded the stock. Another clothing chain, Gymboree, which sells children’s apparel, surged 1 1/2 to 29. Although its second-quarter earnings were unchanged at 17 cents a share, they were a penny better than investors had expected.
Larger retailers also advanced. Federated Department Stores rose 7/8 to 33 3/4. The Cincinnati-based retailer’s profit from operations in the second quarter fell to 16 cents a share from last year’s 37 cents, but that was 4 cents higher than analysts had forecast.
* Retirement Care slid 1 1/2 to 10 3/8. The New York Times reported that its top two officers have had run-ins with securities regulators that were not fully disclosed to shareholders when the officers took control of the company in 1991.
* Ralcorp added 2 1/2 to 22 1/2 after agreeing to sell its Chex cereal and other brands to General Mills for $570 million, including assumption of debt. General Mills fell 1/4 to 55 1/8.
* Sears Roebuck, one of the 30 stocks in the Dow industrials, added 1 1/4 to 44 7/8. Goldman Sachs upgraded Sears to its “recommended” list.
Overseas, Tokyo’s Nikkei stock average rose 0.6%, Frankfurt’s DAX index fell slightly and London’s FTSE-100 rose 0.2%.
Meanwhile, copper prices rose after a large smelter in Arizona was unexpectedly shut down for maintenance while inventories of the metal remained tight.
At New York’s Commodity Exchange, September copper closed up 1.70 cents at 93 cents a pound after earlier rising to 93.50 cents, the highest level since Aug. 1.
London Metal Exchange “warehouse stocks are rising again and demand in Europe is weak, but the scrap market is tight, demand in the rest of the world is good,” Deutsche Sharps Pixley Metals trader Richard Hirsch said.
Weekly copper stocks at the LME were reported as 5,225 metric tons higher Tuesday at 243,225 tons. Comex copper stocks rose 757 short tons to 20,510 tons.
September copper hit a 2 1/2-year low at 82.70 cents on June 26 after a wave of selling was triggered by fears that Sumitomo would dump a huge horde of metal on the market after the dismissal of its chief copper trader. Those fears have subsided somewhat.
Market Roundup, D6
