Dow Gains 16 as Investors Turn to the Big Guns
Blue-chip stocks shook off early selling pressure and ended at record highs for the second time in three days Wednesday as investors sought the safety of big companies more likely to deliver solid earnings.
The index of 30 blue chips rose 16.03 points to close at 6,020.81, its 29th record this year, surpassing Monday’s 6,010.00, which was its first close above 6,000.
The Standard & Poor’s composite index of 500 stocks also set a new high, with a gain of 1.84 points at 704.41, topping Monday’s record of 703.54.
In the broader market, declining issues led advances by a narrow margin, 1,212 to 1,124, on heavy volume of 441.4 million shares on the New York Stock Exchange.
“The OTC and broad markets are still under pressure with investor nervousness over profit margins in the technology area and a flight to quality,” said Michael Metz, Oppenheimer & Co.’s chief investment strategist.
“We had a big run in tech stocks and it looks like investors are turning risk-averse,” he said.
Profit taking in technology stocks drove the Nasdaq composite index down 7.11 points to 1,250.99 after it set two straight record closes Monday and Tuesday.
The Nasdaq fell despite solid quarterly earnings reports from Compaq, Sun Microsystems and Computer Associates.
Tech stocks have surged since Intel in mid-September forecast that it would post better-than-expected third-quarter results. On Monday, Intel reported a 40% jump in profit.
“People think some technology companies will come in higher, or substantially higher [than the Street consensus] and punish stocks giving any whiff of disappointment,” Metz said.
Peggy Farley, chief executive at Amas Securities, said that despite the profit taking--some of it by investors skeptical the market rally can continue--investors were buying on dips.
“You see downturns and recoveries, which indicate that there is buying whenever the market moves down,” she said. “There are as many bulls out there, if not more, than there are bears.”
Farley said sellers were motivated by profit taking rather than a rush into cash, something evident in the modest nature of the market’s decline.
“There are very few players who anticipate a major correction of any sort,” she said.
Analysts said the market may have gotten a belated boost from news before the opening that consumer prices rose moderately in September, continuing a pattern of tame inflation in a slow-growing economy.
The Labor Department said the consumer price index rose 0.3% last month after an increase of 0.1% in August.
In the bond market, the yield on the key 30-year Treasury rose to 6.85% from 6.84% on Tuesday.
Among Wednesday’s highlights:
* Sears, which exceeded expectations with a 22.4% increase in third-quarter earnings, was one of the Dow’s biggest gainers, rising 2 to 50 1/2. Merck reported a 16% improvement and its stock rose 3/4 to 72 after some early sluggishness.
* Compaq lost 1 1/8 to 73 5/8 after its third-quarter earnings surpassed Wall Street estimates, but analysts said the stock had run up in expectation of a very strong quarter. Sun Microsystems lost 6 7/8 to 63 1/8 even though its earnings slightly exceeded Wall Street’s estimates. Computer Associates sank 2 7/8 to 62 7/8. Its earnings also surpassed analysts’ expectations.
* BT Office lost 3 7/8 to 9 after warning that its third-quarter results would disappoint.
* Verifone slumped 7 3/8 to 33 1/2 after reporting disappointing quarterly earnings.
Overseas, Tokyo’s Nikkei stock average fell 0.2%, Frankfurt’s DAX index fell 0.5%, and London’s FTSE-100 fell 0.7%.
* ROSY OUTLOOK
A survey shows mutual fund investors are optimistic. D6
