Stocks Flirt With Highs but Lose Conviction
Stocks flirted with record highs Thursday as the latest economic data reinforced an outlook of stable inflation and interest rates.
But most of the day’s gains evaporated near the close as a rallying bond market failed to inspire stock investors for the third straight session.
The Dow Jones industrial average fell 8.51 points to 5,868.85 after rebounding from an early 26-point slide and briefly moving past Monday’s all-time high of 5,894.74.
The New York Stock Exchange composite index held on to enough of its advance to close at a new high, but most broad measures finished with fairly modest gains after retreating into the close.
“Stocks have been up, up and away this month, so they’re short-term extended, and it’s time to give back a little bit,” said Alfred E. Goldman, vice president at A.G. Edwards & Sons Inc. of St. Louis.
Goldman and other analysts said stocks had already been rallying for weeks on optimism that there would be little increase or no change in interest rates at Tuesday’s Federal Reserve Board policy meeting.
Bonds continued to rally in the aftermath of the Fed’s decision to leave rates unchanged, boosted by fresh signs of a slowing economic growth in Thursday’s reports on durable goods factory orders and weekly jobless claims.
Higher inflation and interest rates would make the fixed payoff on bonds less attractive, forcing down prices to improve the yield. As bond prices rose Thursday, the yield on the 30-year Treasury bond fell to 6.88% from late Wednesday’s 6.92%, reaching the lowest level in more than a month.
The economic news fueled the selling of $12.5 billion of five-year Treasury notes, whose yields fell at auction to 6.409%, the lowest rate since April.
On the NYSE, advancing issues outnumbered decliners by an 11-8 margin.
The Standard & Poor’s 500-stock index rose 0.03 point to 685.86, and the NYSE composite index rose 0.69 point to 365.99, beating Friday’s record finish at 365.77.
The renewed interest in computer-related shares continued to percolate, lifting the technology-rich Nasdaq composite index 3.32 points to 1,227.98, about 21 points shy of June’s record levels.
The American Stock Exchange’s market value index rose 1.30 point to 567.19.
The Wilshire 5,000 index of the biggest stocks on the New York and American stock exchanges and Nasdaq Stock Market climbed 14.27 points to 6749.13 and the Russell 2,000 index of small company shares rose 1.28 points to 345.00.
Among Thursday’s highlights:
* Chemical giant DuPont, up 2 1/8 at 89, was the Dow’s biggest gainer after announcing that it expects third-quarter earnings to exceed projections.
Other chemical makers advanced too. BF Goodrich rose 7/8 to 44 7/8, Cabot gained 3/4 to 28 3/4 and Minerals Technologies rose 7/8 to 36 7/8.
* Drug maker Pfizer vaulted 1 1/2 to a record 78 7/8 after it said it will repurchase $2 billion of stock. It helped boost other drug companies, including Merck, which announced its own buyback of $3 billion in November, up 1 7/8 to 70 3/4; Bristol-Myers Squibb, which said in March that it plans to repurchase $2.2 billion of its own stocks, jumped 1 1/4 to 97 1/4; Schering-Plough, which this week said it planned an additional $500-million buyback after completing a similar buyback in July, rose 1 1/4 to 61 1/4.
* A number of semiconductor chip makers slumped after Advanced Micro Devices, down 3/4 to 15 1/4, said it will lay off as many as 200 workers because of a slowdown in the chip industry. Varian Associates, which also announced a work force cut of 115, fell 5/8 to 47 1/2; Burr-Brown dipped 1 1/8 to 19 7/8; and FSI International fell 3/8 to 11 1/4. Both companies have announced layoffs in recent weeks.
* Elsewhere in the tech sector, software writer Adobe Systems surged 3 5/8 to 38 5/8 on news of third-quarter earnings. But Silicon Graphics slumped 1 3/8 to 22 1/8 after reports that its earnings would fall “materially below” expectations in its current quarter.
* Investors continued to be enthusiastic for shares of companies going public for the first time. Abercrombie & Fitch soared 7 1/8 to 23 1/8. The 100-store chain sold 7 million shares at $16 each.
Halter Marine Group, a builder of tugboats and medium-sized oil tankers, rose 3/4 to 11 3/4. It sold 3 million shares at $11 each.
Overseas, Tokyo’s Nikkei stock average rose 0.5%, Frankfurt’s DAX index rose 0.3% and London’s FTSE-100 fell 0.1%.
Market Roundup, D6
