Dow Just Shy of Record High as Wall St. Cheers Inflation News
Key blue-chip stocks traded at record levels Thursday before trimming gains in the final hour, leaving the Dow Jones industrial average 7 points short of a new closing high.
Overall, stocks posted a broad advance after bonds rallied on news of an encouraging August wholesale price report. That set the stage for today’s August consumer price report.
On Wall Street, the Dow ended up 17.02 points at 5,771.94. It had traded as high as 5,792 in late afternoon, easily eclipsing the record closing high of 5,778.00 set May 22.
Broader market indexes also jumped, with smaller-stock indexes gaining more than the Dow in percentage terms. The Nasdaq composite index rose 11.86 points, or 1%, to 1,165.81.
Investors were cheered by lower bond yields after the government said wholesale prices, excluding food and energy, fell 0.1% in August, suggesting little general inflation in the economy.
The 30-year Treasury bond yield slipped to 7.07% from 7.11% on Wednesday, and shorter-term yields also dropped. The six-month T-bill yield eased from 5.51% on Wednesday to 5.48%, the lowest since Aug. 30.
Despite the economy’s apparent strength, “inflation isn’t picking up,” said Roger Lavan, a fund manager at Salomon Bros. Asset Management in New York.
That raised some hopes that a widely expected credit-tightening move by the Federal Reserve Board won’t happen after all--or will be minimal, perhaps just a quarter-point increase in the Fed’s benchmark short-term interest rate, now at 5.25%.
The Fed meets Sept. 24.
The stock market seemed happy enough with the inflation report, and unruffled by another rise in crude oil prices as the United States appeared headed for more military conflicts with Iraq.
October oil futures in New York rose 25 cents to $25 a barrel, the highest since April and nearing levels last seen in 1991, before the Persian Gulf War.
Analysts say Wall Street believes it has little to really fear from Iraqi dictator Saddam Hussein because the United States could launch a massive strike against Iraq if provoked.
Meanwhile, many investors are focusing on the potential for strong third-quarter corporate earnings, given the economy’s health.
“Earnings could be good, particularly as we go into 1997,” said Bob Pyles, director of equities at BankAmerica Corp., which manages about $48 billion.
Even so, several major companies on Thursday warned of weaker-than-expected earnings in the current quarter.
Among Thursday’s highlights:
* Some technology and telecommunications issues rose sharply. Microsoft surged 3 1/2 to a record 128 5/8 after previewing Internet-related software products. Other gainers included U.S. Robotics, up 4 7/8 to 61 3/4; Network General, up 2 3/8 to 20; and Cisco Systems, up 1 13/16 to 56 3/16.
On the flip side, specialty semiconductor maker International Rectifier eased 3/8 to 13 1/4. After the market closed, it said earnings in the current quarter will fall “significantly below” expectations as customers cut inventories.
Also, AMP dropped 1 3/8 to 37 3/4. The electronic connectors manufacturer said current-quarter results will be below its previous expectations.
* Walt Disney led the blue chips higher, gaining 1 7/8 to 60 1/2. Also rising were GE, up 1 to 87, and 3M, up 7/8 to 69.
* Many banks were higher as bond yields fell. Wells Fargo rose 2 1/4 to 259 1/8, First Chicago NBD gained 1 1/4 to 44 3/4 and Zions Bancorp was up 1 3/4 to 89 3/4.
* Oil stocks were hit by profit taking. Mobil dipped 1 7/8 to 116 1/2 and Texaco eased 1 to 93 5/8.
* Xerox slumped 3 1/4 to 54 5/8 on news that a deal to sell its insurance unit had collapsed.
* Southland grocery giant Vons fell 1 1/4 to 39 3/4. Archrival Ralphs announced widespread price cuts in a grab for market share.
In foreign trading, Paris’ CAC index jumped 1.3% to 2,065.37 and London’s FTSE-100 index added 0.7% to a record 3,932.60.
Market Roundup, D6
