Wall St. Cheers Inflation News; Dow Up 47.71
Blue-chip stocks closed higher Friday, for the first time this week, as news that wholesale prices had edged up only slightly last month helped the market to overcome worries about upcoming corporate earnings reports.
The Dow Jones industrial average rose 47.71 points to 5,969.38, bouncing back from four consecutive sessions of losses. For the week, the Dow was down 23.48 points. The index briefly saw a gain of 50 points, and that activated New York Stock Exchange limits on program trading.
In the broader market, advancing issues beat decliners 1,433 to 864 on moderate volume of 395 million shares on the NYSE.
The upturn came on the bull market’s sixth anniversary.
The Dow 30 cracked the 6,000 level briefly on Monday and Tuesday, but it finished lower both days.
Wall Street cheered news that the producer price index rose only 0.2% for September, slightly less than expected and a sign that inflation was at the wholesale level was tame. According to another government report, retail sales increased 0.7% last month, well beyond forecasts, but the report also contained a downward revision for August sales, to a 0.2% decline.
The two readings were seen as reinforcing the conditions that have helped the markets bounce back so quickly from July’s sell-off: economic growth strong enough to keep company profits rising, but not so strong as to send prices soaring.
“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, managing director of technical analysis at Dain Bosworth in Minneapolis.
“We were hitting on all cylinders, and what launched it was the combination of good retail sales and a good wholesale inflation number,” said Hugh Johnson, chief investment officer at First Albany Corp.
In the inflation-sensitive bond market, the yield on the bellwether 30-year Treasury bond fell to 6.84% from 6.88% on Thursday.
Among the big gainers in stocks were technology issues--particularly those of semiconductor companies--and brokerage houses and retailers. Shares of precious metals companies fell.
Morgan Stanley set a positive tone for computer chip stocks with an upgrade of Intel to “strong buy” from “outperform.” . The chip maker is expected to announce its quarterly results on Monday. Its shares rose 5 1/2 to 105 3/8.
“It was a real barnburner of a day for the technology sector because with tightness in the labor and capital markets, companies are investing in capacity-enhancing technology, so most economists are now revising upward their forecasts for technology spending,” Johnson said.
Among market highlights:
* Among other tech stocks, Texas Instruments rose 1/4 to 55 3/8, Motorola gained 1/2 to 48 3/4, Atmel added 1 1/4 to 31 3/8, Applied Materials was up 3/8 to 29 3/4 and IBM closed up 2 3/8 at 130 1/8, a new 52-week high.
* Cascade Communications, the Nasdaq’s most-active issue, was hammered. Though it reported quarterly results that exceeded Wall Street expectations, investors had hoped to see gains that were bigger yet. Cascade fell 15 1/8, a 17.5% loss, to close at 71 3/8 after almost 16 million shares changed hands.
* Bank and utility shares gained, largely because those companies are major borrowers of capital and their financing costs are reduced when interest rates decline. Barnett Banks rose 1 3/4 to 37 1/2, an all-time high; First Chicago NBD rose 5/8 to 46 1/8; PNC Bank gained 1/4 to 34 1/4; Suntrust Banks gained 7/8 to 43 1/4; and Banc One advanced 3/8 to 41 1/8.
* Pharmacia & Upjohn slumped 5 1/4 to 36 1/4 after disclosing that third-quarter earnings per share would fall 20% below analysts’ expectations. The Swedish-American drug maker blamed sluggish U.S. sales and unfavorable currency translations from the Japanese yen and the Italian lira.
* Abbott Laboratories stock rose 1 1/2 to 50 3/8 after the drug and health-care-supplies maker said it plans to buy back as many as 20 million shares, or about 2.6% of its shares outstanding.
In commodity markets, surprising increases in government crop estimates set off a wave of selling that sent corn prices to their lowest level in 10 months and soybeans to a nine-month low.
Cotton and orange juice prices also tumbled after the Agriculture Department released its crop report. Corn for December delivery fell 6 1/4 cents to $2.83 3/4 a bushel at the Chicago Board of Trade, the lowest since December 1995. November soybeans fell the daily 30-cent limit to $7.00 1/4 a bushel, the lowest since January.
The declines were reflected in the Commodity Research Bureau’s index of 17 commodities that fell 1.68 points to 245.70.
Market Roundup, D4
