Technology Issues Lead Stocks Higher
Technology stocks led Wall Street’s powerful rally Friday, as the bull market appeared to resume in earnest on news of low inflation and falling bond yields.
The Nasdaq composite index, heavy with tech issues, zoomed 22.86 points, or nearly 2%, to 1,188.67, outperforming the Dow industrial index’s gain of 66.58 points, or 1.2%, to 5,838.52.
Even so, the blue-chip Dow’s close was a record, topping the previous high of 5,778.00 set on May 22. The Nasdaq index remains 4.8% below its record high of 1,249.15 set on June 5.
The Standard & Poor’s 500 index of major stocks also closed at a record, rising 9.39 points to 680.54.
Analysts said the new highs, recovering the last of blue chips’ losses in the July market sell-off, are an affirmation of investors’ faith in the economy’s ability to grow at a decent enough pace to keep corporate earnings rising, but not so fast as to spark higher inflation and higher interest rates.
“Things are awfully good here and worldwide,” said James Melcher, president of Balestra Capital, which manages about $100 million. “We don’t see any real signs of inflation. Growth is decent, it’s not going to run away; what more could you ask for?”
Stocks’ surge was fueled by falling bond yields, as the government’s report of minuscule consumer-price inflation in August raised hopes that the Federal Reserve Board will refrain from tightening credit later this month to slow the economy.
Treasury bond yields dropped across the board. The 30-year T-bond yield fell below the psychologically important 7% level to 6.95%, down from 7.07% on Thursday and down from 7.15% as recently as Sept. 5.
The yield on two-year T-notes sank to 6.12% from 6.28% on Thursday.
For stocks, which had largely ignored the recent pickup in yields and the latest U.S.-Iraq crisis, Friday’s bond rally just encouraged more buyers to step up to the plate.
Trading volume on the New York Stock Exchange was the briskest since July 17, as 488 million shares changed hands. Advancing stocks outnumbered those that declined by about 17 to 7.
Oil prices helped, falling after Iraq called a cease-fire in its skirmishes with U.S. forces. October oil futures on the New York Merc slid 49 cents to $24.51 a barrel.
For the stock market, “Mood, momentum and money flow are back in gear,” said Alan Ackerman, market strategist at Fahnestock & Co. “This is the magic moment that people have talked so often about: The Dow has broken through 5,800 and now some have lifted their sights to 6,000.”
For the week, major indexes made their best run since the week ended Aug. 2, when the market was recovering from July’s pullback. The Dow gained 3.2% for the week. The Nasdaq index gained 4.3%.
Among Friday’s highlights:
* Technology shares were powered by bullish comments from some key research firms.
Soundview Financial Group, known for its prescient analysis of the computer chip industry, said that technology shares on average could appreciate by 30% to 40% in the next four to five months on optimism about improving sales and earnings.
Also, Merrill Lynch & Co. raised its rating on IBM to “buy” from “accumulate.”
IBM jumped 4 7/8 to 122 1/8. Other tech winners included Intel, up 2 3/4 to 88 1/8; Microsoft, up 2 3/8 to 131; Oracle, up 4 5/8 to 42 1/8; Cabletron Systems, up 6 1/4 to 64 1/8; and BMC Software, up 6 to 85 1/8.
* Interest-rate-sensitive stocks were bolstered by the drop in bond yields. Federal National Mortgage rose 1 to 34 5/8, Merrill Lynch added 1 1/4 to 64 3/8, Citicorp surged 2 1/4 to 88 1/2 and BankAmerica gained 7/8 to 82 3/8.
* Solectron, a manufacturing service company, jumped 6 1/2 to 41 amid enthusiasm for robust fiscal fourth-quarter earnings, due to be reported Monday.
* Drug stocks were strong. Bristol-Myers gained 1 3/8 to 94 3/8, Lilly jumped 1 3/8 to 62 1/8 and Amgen added 7/8 to 59 1/2.
* Industrial issues also rallied. Caterpillar jumped 2 1/4 to 74 1/8, PPG Industries added 1 to 53, Emerson Electric soared 2 3/8 to 88 1/4 and GE surged 1 3/8 to 88 3/8.
The strong U.S. market pulled up many foreign markets. London’s FTSE-100 index gained 0.9% to a record 3,967.90. In Frankfurt, the DAX index jumped 1% to a record 2,595.96.
In Toronto, the TSE-300 index fell short of a record but still was up 1% to 5,243.27. Mexico City shares, however, closed lower, with the Bolsa index off 0.2% to 3,311.61.
Market Roundup, D4
