Dow Up 50 to 6,397 as Buyers Rush In Again
The 1996 bull market continued to rewrite the record books on Tuesday, as the Dow Jones industrial average stormed to another new high.
The blue-chip index gained 50.69 points, or 0.8%, to a record 6,397.60, and most other major indexes also closed up for the day.
Analysts credited two forces with putting investors back in a buying mood after Monday’s brief market pause: First, some key technology companies gave upbeat projections about business, and second, bond yields eased on fresh signs of weakness in the housing market.
In the tech sector, IBM soared 7 3/8 to 154 1/8 as Wall Street analysts continued to sing the company’s praises, citing strong computer sales trends. Also, Hewlett-Packard jumped 3 to 52 3/4 despite a quarterly earnings report that was below expectations.
Analysts said hopeful investors were focused on Hewlett’s future, not its past. A Merrill Lynch analyst raised earnings estimates for the company, citing a rebound in computer orders in the just-finished quarter.
“People are looking past the earnings to the growth rate, and that is helping,” said Richard Ciardullo, head trader at Liberty Investment Management, which oversees $6 billion.
Meanwhile, in the bond market, yields slipped after the Commerce Department reported that October housing starts fell 5.1% to an annualized 1.366-million rate, the lowest since October 1995.
Bond investors “have one more piece of evidence that there’s very little in the way of inflation pressure,” said David Hoffman, who manages $300 million of bonds at Brandywine Asset Management in Wilmington, Del. “Housing was the one thing in the economy that wasn’t slowing.”
The yield on the bellwether 30-year Treasury bond fell to 6.43% from 6.46% on Monday.
Also, the Treasury auctioned new two-year notes at an average yield of 5.662%, the lowest auction yield since Feb. 27. Still, traders said demand for the notes wasn’t spectacular.
On Wall Street, buyers favored not only tech stocks but also banking shares (as interest rates declined) and energy shares (as natural gas prices surged on weather worries). Winners topped losers by 14 to 10 on the New York Stock Exchange. Yet losers once again dominated on the Nasdaq market of mostly smaller stocks.
Some analysts worry because they say the stock market’s latest advance is too heavily focused on blue-chip stocks. “It’s been narrower and narrower in terms of the stocks participating in the market’s rise,” said Richard E. Cripps, chief market strategist for Legg Mason of Baltimore. “The Dow’s rise is still not pulling the rest of the market with it.”
Narrow leadership often denotes a peaking market rather than one poised for significant new gains, some analysts say.
Among Tuesday’s highlights:
* Tech issues flying higher included Compaq, up 4 3/8 to 80 1/2 after upbeat comments from its chief executive (Stock Watch, page D6); Intel, up 5 3/8 to 120 3/4; Microsoft, up 5 1/2 to 155 7/8; and Cabletron Systems, up 3 1/4 to 81.
* Banking stocks benefiting from expectations for lower interest rates included Wells Fargo, up 5 1/4 to 282 1/4; Citicorp, up 1 3/4 to 107; BancOne, up 1 5/8 to 44 1/8; and Wachovia, up 2 1/8 to 57 1/4.
* Among energy issues, Chevron gained 1 5/8 to 67 1/2, Amoco added 1 1/8 to 77 3/8 and Nuevo Energy rose 1 1/2 to 51 1/2.
* Kmart surged 1 5/8 to 11 1/4 on speculation that it was in takeover talks with Kohlberg Kravis & Roberts. Both companies declined to comment.
