Dow Soars 76 to Top 6,500; Rally Broadens
The stock market roared to new highs Monday, extending a historic rally that many analysts say has become dangerously overblown, yet which also appears to have no natural enemies in the near term.
The Dow Jones industrials leaped 76.03 points, or 1.2%, to a record 6,547.79, as investors continued to pour cash into big-name, blue-chip stocks that are perceived as relatively “safe” bets.
“It’s going vertical,” declared Ralph Acampora, veteran analyst at Prudential Securities in New York, noting that the Dow has rocketed 466 points, or nearly 8%, just since election day.
If the index continues rising at this pace, it will reach 10,000 by about mid-April.
While almost no one on Wall Street expects that, many pros say the backdrop of a slowing economy and easing interest rates, along with rejuvenated hopes for an agreement to balance the federal budget, have left money managers feeling that there is greater risk in being out of stocks than in them--even as prices reach extraordinary levels.
What’s more, December and January are historically good months for stocks, so many investors are naturally reluctant to let go despite recent sharp gains.
Even so, “this is scary, it truly is,” said Mark Stumpp, research chief at Prudential Diversified Investment Strategies, a $22-billion-asset money manager. “I spend a lot of time forcing myself to buy stocks, because my gut instinct is not to.”
There was no single major catalyst for Monday’s rally. Bond yields eased, but modestly, on news that home sales dipped in October--another sign of a weaker economy.
Bank stocks, which have been one of the strongest sectors in recent weeks, staged a powerful new advance, which may have triggered fresh hopes that interest rates will continue to come down. Financial stocks often rally on expectations of lower rates.
The best news of the day was that stocks’ rally broadened significantly, as investors picked at smaller issues that have badly lagged blue chips lately.
Rising stocks outnumbered losers by 17 to 9 on the New York Stock Exchange and by 23 to 18 on Nasdaq, in active trading. The Nasdaq composite index of mostly smaller issues gained 6.01 points to a record 1,280.37, though its 0.5% rise was less than half the Dow’s.
“So far this rally has been in the big names but it is beginning to broaden,” said Stumpp. That is important because it suggests that the market is attracting a wider range of investors who could potentially fuel a new leg up in the rally.
Among Monday’s highlights:
* The Dow was led by Philip Morris, which shot up 3 1/4 to 105 1/2 on news that Food and Drug Administration chief David Kessler is stepping down. Kessler has been a vocal opponent of tobacco firms.
Other Dow leaders included Disney, up 1 3/8 to 73 1/2; GE, up 2 3/4 to 103 3/4; and Exxon, up 2 to 94 7/8.
* Bank stocks rocketing higher included J.P. Morgan, up 2 5/8 to 93; BankAmerica, up 5 3/8 to 103 1/8; and Mellon, up 1 7/8 to 70 1/2. Brokerage Smith Barney raised its price targets for several bank shares.
* Eli Lilly led drug stocks higher, rising 3 to 78 after the FDA cleared Lilly’s depression treatment Prozac to treat the eating disorder bulimia nervosa.
* Many tech stocks were relatively flat, taking a breather from their recent surge. Intel lost 1 to 121 1/2 and IBM was off 7/8 to 157 5/8.
Overseas, many foreign stock markets surged along with the U.S. market, with Hong Kong’s key index up 0.9%, Frankfurt’s up 1.3% and Paris’ up 1%.
On the downside, stocks’ rally continued to deflate prices of precious metals. December gold futures fell $1.80 to $374.50 an ounce in New York, a 20-month low.
Market Roundup, D11
