Wall St. Cheers Inflation News; Dow Up 47.71
Stocks rallied briskly Friday and bond yields declined as investors exhaled on news of a smaller-than-expected rise in wholesale inflation last month.
The Dow Jones industrial average rose 47.71 points to 5,969.38, bouncing back from four consecutive declines. For the week, however, the Dow still lost 23.48 points.
The broad market also was higher Friday, as winners topped losers by 15 to 8 on the New York Stock Exchange.
In the Nasdaq market, the composite index gained 11.30 points to 1,248.27.
Stocks took their cue from the bond market on Friday, as yields pulled back after rising for four sessions. The government’s report that wholesale inflation rose just 0.2% in September cheered bond traders, who are perpetually worried that inflation will resurge.
The latest data added to hopes that the U.S. economy is slowing, eliminating the need for the Federal Reserve Board to tighten credit any time soon.
Still, the bond market’s rally wasn’t dramatic. The 30-year Treasury bond yield eased to 6.84% from 6.88% on Thursday. It was at 6.74% a week ago.
For the stock market, any decline in yields seems to be an excuse for more buying. “Inflation is low, the odds of a Fed interest rate hike are remote, at least until after the election, so people are comfortable with stocks,” said Bob Dickey, technical analyst at Dain Bosworth in Minneapolis.
The rally came on the bull market’s sixth anniversary: The Dow reached its 1990 bear market low of 2,365.10 on Oct. 11 of that year. It has been rising in fits and starts ever since, with only two significant pullbacks--in the first half of 1994, and last summer.
Bear markets--the periods between bull markets--are said to occur when the Dow index drops at least 20%. The 1990 bear market saw the Dow fall 21% from its peak that year.
But the index hasn’t declined even half that much since 1990--a tribute to the incredible flow of money into stock mutual funds in this decade and to the robust growth in corporate earnings.
One of the biggest questions facing the bull market now is whether U.S. firms can maintain hefty profit growth in the face of a slowing economy. That’s why third-quarter earnings reports are being closely watched by investors.
Brokerage Morgan Stanley set a positive tone for technology issues on Friday with an upgrade of semiconductor giant Intel to “strong buy” from “outperform.” The stock surged 5 1/2 to 105 3/8. The company is expected to announce its quarterly results on Monday.
Although earnings reports began to trickle out this week, the bulk will be released in coming weeks.
Among Friday’s highlights:
* The Dow was led by GE, up 2 3/8 to a record 94 3/8 one day after reporting quarterly earnings up 11%; DuPont, up 1 3/8 to 96 3/8; IBM, up 2 1/8 to 129 7/8, a new 52-week high; and Texaco, up 1 3/8 to 98 1/8.
* Among tech issues, Compaq jumped 2 1/2 to 71 5/8, Hewlett-Packard added 1 3/8 to 46 1/4, Microsoft gained 3 3/8 to 137 1/8 and Western Digital rose 2 to 46 1/4.
Also, disk drive maker Seagate Technology surged 3 1/8 to 67 1/2 after reporting quarterly earnings above expectations, though basically flat with a year ago.
* Other stocks responding favorably to earnings reports included conglomerate Dover, up 1/2 to 50; computer networker Ascend Communications, up 1 to 65 3/8; brokerage Charles Schwab, up 1 3/8 to 24 3/8; and Columbia Gas, up 1 1/8 to 59 7/8.
* On the downside, Cascade Communications was hammered. Though it reported quarterly results that exceeded Wall Street expectations, investors had hoped to see gains that were bigger yet. Cascade, which makes telecommunications equipment, plunged 15 1/8 to 71 3/8.
* Drug giant Pharmacia & Upjohn slumped 5 1/4 to 36 1/4 after disclosing that third-quarter earnings may fall 20% below analysts’ expectations because of sluggish sales and foreign-currency translation losses.
But most other big drug stocks were higher. Schering-Plough rose 1 1/2 to 63 1/2, Warner-Lambert gained 1 1/4 to 64 3/4 and Amgen jumped 2 3/8 to 64.
* Financial shares generally gained as interest rates eased. Wachovia rose 1 to 49 7/8, Barnett Banks gained 1 3/4 to 37 1/2, Citicorp surged 1 5/8 to 93 and Merrill Lynch soared 1 3/8 to 69 3/4.
* Among new stock issues, Sabre Group got a rousing welcome, as did retailer Hibbett Sporting Goods, which went public at 16 and closed at 20 on Nasdaq.
In commodity markets, surprising increases in government estimates for this year’s major farm crops set off a fresh wave of selling that sent corn prices to their lowest level in 12 months and soybeans to a 10-month low.
Cotton and orange juice prices also tumbled after the Agriculture Department released its crop report.
Market Roundup, D4
