Bond Rally, Tech Shares Boost Stocks
Stocks gained Tuesday, led by a fresh rise in technology shares and a bond market that rallied after three sessions of weakness.
The Dow Jones industrial average ended up 17.38 points at 5,711.27. In the broader market, advancing issues beat decliners 1,387 to 899 on moderate volume of 306 million shares on the New York Stock Exchange.
The technology-laden Nasdaq composite index, up 9.80 points to 1,149, rose more than the Dow in percentage terms (0.86% versus 0.31%), as investors hunted for issues with the potential to show above-average earnings growth.
Among tech issues, Microsoft rose 1 7/8 to 124 3/4, 3Com gained 2 1/4 to 46, Parametric shot up 1 3/4 to 47 7/8 and Netcom Online jumped 2 5/8 to 21 3/4.
In the bond market, the 30-year Treasury yield eased to 6.97% from 7% at Monday’s close.
“Bonds rallied on bargain hunting after Monday reaching the critically important 7% level,” said Philip Orlando, chief investment officer at Value Line Asset Management. “But bonds are really counterintuitive to the data we saw today.”
Yields fell despite news that suggested that the economy will strengthen in the months ahead, which may encourage the Federal Reserve Board to raise interest rates to slow economic growth.
The Conference Board, a business research group, reported that its index of consumer confidence rose to a six-year high of 109.4 in August from a revised reading of 107.0 in July.
“Confidence levels about both current and future business conditions are higher now than at any time since early 1990,” said Lynn Franco, associate director of the board’s consumer research center.
The consumers’ expectations for the next six months also jumped last month, with the index at 97.7 from a revised 95.0 in July; the current-conditions component rose to 126.9 from a revised 125.0 in July. The index is based on a survey of 5,000 households.
In both stock and bond markets trading interest remained subdued ahead of the long Labor Day weekend.
“Everyone has done what they wanted to and is waiting for the holiday,” said Michael Metz, chief investment strategist at Oppenheimer & Co. “The fear is that we have seen the low in interest rates, and the question now is how far up will they go.”
Among Tuesday’s highlights:
* Philip Morris extended its rebound, rising 1 1/2 to 91 7/8 in the wake of Friday’s Indiana jury ruling in favor of major tobacco companies in a tobacco liability case. The giant tobacco company’s stock was also boosted by speculation that its board will increase its dividend and split its shares at today’s meeting.
* Boeing added 7/8 to 91 1/4 after the plane maker said it will boost the production rate for its new 777 jet transport to seven airplanes per month from five, and analysts expect it to launch the long-awaited stretch version of its 747 jumbo jet next week.
* PepsiCo was the most active NYSE issue, off 5/8 to 31 on trading of 7.6 million shares. Salomon Bros. handled a huge 3-million-share block trade.
* Olympic Financial rose 2 1/4 to 26 1/4 after jumping 6 1/4 on Monday on news that two possible acquirers had indicated interest in buying it.
* WorldCom fell 1 3/4 to 21 after losing 3 5/8 on Monday on news of its multibillion-dollar merger pact with MFS Communications. MFS, which had soared 9 15/16 on Monday, lost 3 1/2 to 41 5/16.
In overseas stock markets, the Nikkei index in Tokyo gained 0.13%, the DAX in Frankfurt added 0.05%, and the FTSE-100 index in London eased 0.05%.
Market Roundup, D5
