Dow Passes 5,900; Yields Fall on Economic Report
The Dow Jones industrial average finished above 5,900 for the first time, as the latest economic news sent interest rates lower in the bond market on Tuesday.
But technology shares slumped.
The Dow industrials rose 22.73 points to 5,904.90, beating the Sept. 23 record finish of 5,894.74. The Standard & Poor’s 500 list and the New York Stock Exchange composite index, which are also dominated by large companies, added to Monday’s record highs, but the gains were similarly modest.
“People are feeling a bit better. It gets back to the average guy on the street who’s really making this happen with 401(k) and college fund contributions,” said William LeFevre, a senior market analyst at Ehrenkrantz King Nussbaum.
“The market is really laboring,” said Michael Metz, vice president of Oppenheimer & Co. “Everything is at a high. But looking into the market, there’s increasing risk aversion. People are concentrating on a small class of blue chips.”
Metz said that “there is some concern about pressure on profit margins even though the economy continues to expand,” noting the stern investor response to discouraging earnings announcements. “The market will brook no disappointment.”
America Online shares, for example, fell 3 1/2 to 32 on late Monday’s revelation that the online service is having trouble keeping subscribers. And the stock of HCIA nearly halved, tumbling 27 1/8 to 32 7/8 as the Nasdaq market’s most active issue, after the Baltimore-based health-care information provider said it won’t meet earnings expectations for the second half.
“We’re at very high ground. When you get companies reacting that violently to earnings news, that’s a sign of a toppy market,” said Thom Brown, market strategist at Rutherford, Brown & Catherwood in Philadelphia.
Coca-Cola, meanwhile, slipped 3/4 to 50 1/8 despite the Dow component’s announcement that it expects to meet third-quarter estimates.
Stocks shook off some morning weakness as bond investors reacted to a report showing that the manufacturing sector’s growth slowed in September.
The data helped counter Monday’s indications of rapid growth in consumer spending and demand, which could aggravate other inflationary pressures in the economy.
Although investors were cheered last week when the Federal Reserve Board decided not to raise its key lending rates, some remain concerned that the central bank’s policymakers will be forced to slow the economy with higher interest rates when they meet after the November presidential election.
Higher inflation or interest rates make the fixed payments on existing bonds less attractive, forcing prices down to improve the yield. As bond prices rose Tuesday, the yield on the 30-year T-bond--a key determinant of corporate and consumer borrowing costs--fell to 6.87% from Monday’s 6.92%.
Among Tuesday’s highlights:
* AT&T; rose 1 1/2 to 38 7/8, with some analysts attributing the gain to Monday’s spinoff of Lucent Technologies through a distribution of Lucent shares. “There’s a lot of selling [of Lucent shares] among old-time AT&T; holders who decided they only want to hold AT&T;,” said Brown. Lucent fell 2 to 43 7/8 as the NYSE’s most active issue.
* Xilinx, which supplies programmable logic devices to the phone and data networking industries, shed 2 3/8 to 31 5/8 after forecasting net income and revenue for the second quarter ended Sept. 28 would be below that of the first quarter.
* Micron Technology lost 1 3/8 to 29 1/8 amid chip sector weakness and news that Micron shuffled its board of directors.
Overseas, Tokyo’s Nikkei stock average fell 0.4%, Frankfurt’s DAX index rose 0.1%, and London’s FTSE-100 rose 1.0%.
Market Roundup, D6
