Dow Soars Above 6,500; Yields Decline
Blue-chip shares soared again Monday, defying expectations for a Thanksgiving week slowdown and boosting the Dow Jones industrial average above 6,500 just six weeks after its first close above 6,000.
The Dow industrials rose 76.03 points to close at 6,547.79, their 12th record close in the last 14 sessions. It was the best one-day gain for the blue-chip barometer since a 96-point rally the day after election day.
“The stock market is acting as if we are in a perpetual state of bliss, but we all know nothing is perpetual in the financial markets,” said Jeffrey Applegate, chief investment strategist at Lehman Bros. He said the market isn’t as overpriced as some people fear, but he added that “one way or another, we’re going to have to take a breather and maybe retrench a bit.”
Broader measures also set new highs, led by banks and other financial concerns that would benefit from the improving interest rate environment, and by a late rally of tobacco stocks fueled by Food and Drug Administration chief David Kessler’s announcement that he is resigning.
Bonds prices rose after the National Assn. of Realtors reported that sales of existing homes fell 1.5% in October, the fifth consecutive monthly decline.
The benchmark 30-year bond yield fell to 6.42%, just above the eight-month low reached Wednesday and below Friday’s 6.44%. Two-year note yields fell to 5.66% from 5.67%.
Meanwhile, technology bellwethers such as IBM, which led last week’s charge, were pulled lower by profit taking. IBM slipped 7/8 to 157 7/8 and Intel fell 7/8 to 121 1/2, but Microsoft rose 3 to 153 1/2.
Financial stocks, which enjoy a larger profit margin on the money they lend when interest rates are lower, filled the leadership vacuum left by the tech sector. J.P. Morgan rose 2 5/8 to 93 as one of the Dow’s biggest gainers, while BankAmerica soared 5 3/8 to 103 1/8 after Smith Barney Inc. raised its price target for the money center bank to $115 a share from $100.
Philip Morris led the Dow average higher, rising 3 1/4 to 105 1/2 in the last hour of trading after Kessler’s resignation statement. The controversial FDA chief had sought more regulations on tobacco.
NYSE trading curbs were imposed after the Dow rose 50 points. The so-called circuit breakers limit computer-guided buying and selling in an effort to reduce volatility.
Among Monday’s highlights:
* The Dow’s other big advancers were United Technologies, up 3 1/2 at 138 1/2, and General Electric, up 2 3/4 at 103 3/4.
* Other tobacco stocks also gained. RJR Nabisco rose 1/2 to 32 and American Brands gained 1/2 to 48 7/8.
* KCS Energy fell 7 1/4 to 34 7/8 after a Tenneco unit won a $143-million jury verdict against the natural gas company for allegedly mixing propane into natural gas Tenneco was forced to buy under 17-year-old “take-or-pay” contracts. Tenneco rose 3/8 to 51.
* Eli Lilly rose 3 to 78 after the company said the FDA cleared its depression treatment Prozac to treat the eating disorder bulimia nervosa.
* Computer components maker RadiSys fell 7 7/8 to 43 1/8 after reports that it was being sued by a former executive who claims he was dismissed after he discovered the company overstated earnings. RadiSys denies the allegations.
The dollar registered its biggest gain against the German mark in almost nine months, and it rose to an 18-day high against the yen after Japanese media cited the Bank of Japan’s executive director as saying more bank collapses in Japan can’t be ruled out in the wake of last week’s failure of Hanwa Bank.
The dollar rose to 1.5236 marks from 1.5071 marks Friday, and it cost 112.63 yen, up from 111.46 yen Friday and the highest level since Nov. 6.
Overseas, Tokyo’s Nikkei stock average rose 0.4%, Frankfurt’s DAX index rose 1.3%, and London’s FTSE-100 rose 0.9%.
Market Roundup, D11
