Stock Rally Continues, but Major Firms Drop
The Dow Jones industrial average chugged to its fourth new high in five days, ending a week that started with its first close above 6,000, as stocks rallied into Friday’s close.
Broad-market indexes also rallied into the finish, struggling past some profit-taking to pad Thursday’s record highs by the Standard & Poor’s 500 list and the New York Stock Exchange composite index.
The Dow rose 35.03 points to 6,094.23, a gain of 124.85 on the week. If not for the equivalent of a 15-point slide from tumbling Philip Morris shares, the famed barometer of big U.S. companies would have finished above 6,100 just four days after Monday’s momentous close above 6,000.
Friday’s news that the U.S. trade deficit narrowed modestly had little effect on the session, which was dominated by a disappointing profit report from Xerox and revelations of new threats to the tobacco industry’s defense against smoker-liability suits.
Philip Morris was the Dow’s weakest issue, sliding 5 3/8 to 92. Xerox shares plunged 8 1/4 to 48 3/4 as the NYSE’s most active issue.
The technology-heavy Nasdaq market managed a small gain on the day. It had been weighed down throughout the day as investors secured more profits on computer-related issues that shot higher earlier in the week on strong earnings news.
“It’s been a good week, a good run, so a little profit-taking was in order,” said Larry Rice, chief investment officer at Josephthal, Lyon & Ross. He cautioned that “both the stock and bond markets are getting very overbought,” leaving them vulnerable to negative economic or earnings news.
Stocks drew a boost from another slight drop in interest rates in the bond market, which rode the momentum of Thursday’s encouraging indications that the economy may be moderating enough to contain inflation without an interest rate increase by the Federal Reserve Board. But the long 30-year Treasury bond held steady at 6.80%.
Meanwhile on Friday, oil prices soared to the highest levels since the 1991 Gulf War as cold weather swept into the northern United States and both traders and government officials worried about low heating oil stocks.
At the New York Mercantile Exchange, November crude oil futures closed at $25.79, up 37 cents a barrel and the highest close since January 1991 in the middle of the Gulf War.
Friday’s highest traded price was $25.85, beating the $25.70 post-Gulf War high set in April and matched this week.
Heating oil futures lagged crude and gasoline gains, probably because of nervousness ahead of a meeting between Energy Secretary Hazel O’Leary and oil industry executives to discuss low stocks and the surge in prices. But November heating oil still jumped 1.77 cents to close at 74.06 cents a gallon.
O’Leary said on her way into the meeting that she would ask oil company executives whether they had extra refinery capacity to make heating oil. But with U.S. refineries running at between 93% and 95% of capacity in recent weeks, there doesn’t appear to be much room for increased production.
The Department of Energy said this week that U.S. heating oil stocks were down 27% compared to the same time last year, with key East Coast inventories off a huge 43%.
Among market highlights:
* McDonald’s, a Dow average component, slipped 1/8 to 46 1/8 after reporting 10% profit improvement, but a continuing decline in U.S. sales.
* Iomega rose 1-3/16 to 24-1/16 after the desk-drive maker reported earnings late Thursday that were better than Wall Street expected.
* Microsoft lost 3/4 to 134 3/4. SoundView Financial downgraded the software maker.
* Vantive shed 9 1/2 to 31 1/4 after warning that its revenue growth will be flat for the next two quarters, analysts said. Vantive executives were unavailable for comment.
Overseas, Tokyo’s Nikkei stock average rose 0.9%, Frankfurt’s DAX rose 0.7%, and London’s FTSE-100 rose 0.3%.
