Dow Ekes Out Small Gain; IBM Jumps
Stocks closed little changed but mostly higher Wednesday in dull summer trading, with many investors on vacation.
The Dow industrials added 1.11 points to 5,712.38, as profit taking in many of the index’s component stocks was offset by a jump in IBM shares.
In the broad market, winners led losers by 13 to 10 on the New York Stock Exchange and by 20 to 17 on Nasdaq. The Nasdaq composite index rose 4.86 points to 1,153.88.
There was little in the way of market fireworks Wednesday except for IBM’s gain of 3 1/4 to 115, after Salomon Bros. analyst John Jones raised his rating on the stock to “strong buy” and predicted it will reach $145 within 12 months.
Jones said IBM ended its June 30 quarter with the “best revenue acceleration in the past five quarters” and that the outlook for the second half of 1996 and for 1997 “is very positive.” He did not, however, raise his earnings estimates for the company.
In the bond market, the Treasury auctioned $12.5 billion in five-year notes Wednesday at an average yield of 6.57%, slightly above expectations.
Traders said the auction failed to garner substantial interest. The bid-to-cover ratio, or the dollar amount bid versus the amount of notes sold, was 2.13 to 1, down from a 2.46 average ratio in the last 10 such auctions.
Demand was also tepid at the Treasury’s auction of two-year notes on Tuesday, where the average yield was 6.17%. (Investor Spotlight, D8.)
Traders say many bond investors are leery about locking in current yields, fearful that a still stronger-than-expected U.S. economy will prod the Federal Reserve Board to tighten credit, perhaps by late September.
But longer-term yields remained relatively stable Wednesday. The 30-year T-bond yield closed at 6.98%, versus 6.97% on Tuesday.
With so many investors and traders vacationing, many experts say the true test for bond and stock markets will come next week as market players return and decide whether the economy warrants higher or lower interest rates.
Wall Street’s focus also is likely to turn to third-quarter corporate earnings prospects once September arrives, analysts say.
Among Wednesday’s highlights:
* IBM’s gain may have helped some other tech stocks. Sun Microsystems jumped 2 5/8 to 56 3/8, Digital Equipment rose 1 to 38 1/4, BMC Software gained 2 1/2 to 76 3/4 and Dell was up 1 3/8 to 65 5/8.
* Some buyers were attracted to classic consumer growth stocks. Gillette jumped 1 3/8 to 66 3/8, Procter & Gamble added 1 1/4 to 91 7/8 and Merck rose 1/2 to 67 3/4.
But Philip Morris slipped 1/2 to 91 3/8 after rising to 93 3/4 early in the day, after the tobacco giant said it would raise its cash dividend 20%. The move was expected.
PepsiCo was also weaker, falling 1 to 30. The soft drink bottler continues to face setbacks in its battle with Coca-Cola for market share, particularly in South America.
* Footwear stocks were up after an industry report showed an improving price trend for athletic shoes. Nike rose 1 3/8 to 109 3/4, Stride Rite gained 1 1/8 to 8 3/4 and Fila Holdings added 1/2 to 95 3/4.
* WorldCom lost 15/16 to 20 1/16 as the market continued to react negatively to the long-distance company’s $12-billion-plus merger bid for MFS Communications.
* Among Southland issues, biotech giant Amgen fell 1 5/8 to 60 after brokerage Morgan Stanley downgraded the stock to “outperform” from “strong buy.”
On the upside, Jerry’s Famous Deli surged 1 1/2 to 10 3/8 after an investment partnership agreed to invest $6 million in the firm through the purchase of preferred stock. The partnership includes Ken Abdalia, formerly of Salomon Bros., and Ron Burkle, chairman of Yucaipa Cos., a closely held grocery store operator.
In foreign trading, Tokyo shares fell again, with the Nikkei-225 index losing 1% to 20,709 on new worries about the health of the Japanese economy. Mexican shares eased after running to record highs Tuesday.
Market Roundup, D6
