Dow Passes 5,900; Yields Fall on Economic Reports
Blue-chip stocks kicked off the fourth quarter with a rally Tuesday, lifting the Dow Jones industrial average to close above 5,900 for the first time.
But smaller stocks were clipped by profit taking for a second straight session, despite falling interest rates.
Meanwhile, the dollar continued to hover near 32-month highs against the Japanese yen, and some analysts warned that dollar strength could hurt blue chips’ rally.
The Dow ended up 22.73 points at a record 5,904.90, helped by afternoon buying. Tuesday’s close topped the previous record high of 5,894.74 set Sept. 23.
The New York Stock Exchange composite index and the Standard & Poor’s 500 index, also dominated by big-name stocks, hit record highs for a second session.
Winners beat losers by 13 to 11 on the NYSE in active trading.
Traders said the market was helped by falling bond yields, as the latest economic reports--especially the National Assn. of Purchasing Management’s September manufacturing-sector data--appeared to support the idea that economic growth is moderating.
Yields eased across the board, with the bellwether 30-year Treasury bond yield dipping to a five-week low of 6.87%, down from 6.92% on Monday.
Bond traders were also cheered by a report in the Australian Financial Review that quoted Australian Treasurer Peter Costello as saying Federal Reserve Board Chairman Alan Greenspan told him there was no immediate risk of higher inflation in the United States.
The Fed decided Sept. 24 not to tighten credit, opting to see if the economy can slow of its own accord.
In recent sessions, however, worries about an economic slowdown seem to be sending more investors scurrying into blue-chip multinational stocks at the expense of smaller issues that are more dependent on the domestic economy.
On the Nasdaq market of mostly smaller stocks, winners barely edged losers on Monday, and on Tuesday losers outnumbered winners by 21 to 17.
Profit taking in technology issues has weighed on the Nasdaq market, analysts note.
Others say even the recent blue-chip gains aren’t all that impressive. “The market is really laboring,” argues Michael Metz, analyst at Oppenheimer & Co.
Also, the dollar’s sudden strength poses a threat to multinational stocks because it could boost foreign firms’ competitiveness versus U.S. companies. The dollar has been particularly strong against the Japanese yen in recent weeks. (Investor Spotlight, D7.)
Still, analysts say the most important determinant of the stock market’s direction in the near term will be third-quarter earnings reports, due out soon.
Among Tuesday’s highlights:
* Blue chips up sharply included Alcoa, up 1 1/8 to 60 1/8; DuPont, up 1 1/2 to 89 5/8; GM, up 1 3/8 to 49 3/8; and Philip Morris, up 1 7/8 to 91 5/8.
But Coca-Cola eased 3/4 to 50 1/8 after trading as low as 49. The company said its international sales growth slowed in the third quarter and that it will take at least $420 million in charges to reduce costs and its global inventories. Still, Coke said it expects earnings from operations to approximately meet analysts’ consensus third-quarter estimate.
* Many tech stocks finished lower as investors took profits. Computer chip maker Xilinx fell 2 3/8 to 31 5/8 after saying that earnings will be below expectations in the quarter just ended.
America Online slumped 3 1/2 to 32 on new revelations that the online services firm is having trouble keeping subscribers.
Other tech stock losers included Micron Technology, down 1 3/8 to 29 1/8; Seagate, down 1 7/8 to 54; and IBM, off 3/4 to 123 3/4.
* Southland-based Film Roman, a producer of animated TV shows, including “The Simpsons,” went public at 10 a share Tuesday and ended at 10 1/8 on Nasdaq.
Another new stock issue was much hotter: Petaluma-based Advanced Fibre Communications went public at 25 a share and zoomed to 45 1/8 on Nasdaq. Its equipment links copper wire with cable and fiber optics in communications networks.
Market Roundup, D6
