Stocks Extend Rally, Led by Tech Shares; Yields Rise
A fresh rally in technology stocks helped fuel solid gains on Wall Street on Wednesday, despite rising oil prices and another jump in bond yields.
The Dow Jones industrial average added 38.44 points to 6,346.77, its second consecutive gain, as winners topped losers by 16 to 10 on the New York Stock Exchange.
The Nasdaq composite index surged 19.06 points, or 1.5%, to 1,285.38, as major tech shares zoomed higher.
Smaller stocks in general were up sharply. The Standard & Poor’s small-cap index jumped 1.3% to 141.44, double the Dow’s percentage gain.
IBM led the tech group, rocketing 6 3/4 to 158 5/8. “Stocks are in a year-end window-dressing rally, and IBM is the one all the money managers want in their portfolios,” said Philip Orlando, chief investment officer at Value Line Asset Management in New York.
Other analysts said investors were simply hunting for the stocks likely to show the greatest earnings growth in 1997. “Technology has the best growth prospects of probably any area of the market over the next three years,” said Robert Finch, money manager at Aeltus Investment Management.
The stock market seemed unfazed by higher energy prices: Crude oil reached its highest level since the 1991 Persian Gulf War, as cold weather in the East threatened to further draw down depleted heating oil inventories.
More significant, Wall Street ignored another bad day in the bond market. A lukewarm reception for the Treasury’s new two-year notes auctioned Wednesday caused bond yields in general to rise. The two-year notes were sold at an average yield of 5.87%, above expectations, even though small investors were heavy buyers. The Treasury sells new five-year notes today.
The yield on the bellwether 30-year Treasury bond jumped to 6.70% on Wednesday from 6.65% on Tuesday and now is the highest since Oct. 31.
“This can’t go on forever,” warned Joseph Barthel, strategist at Fahnestock & Co. in New York. “There’s a very good correlation that says when interest rates go up, the [stock] market pays the penalty.”
Among Wednesday’s highlights:
* Soaring tech stocks included Intel, up 5 3/4 to 135 3/4; Compaq, up 6 3/8 to 78 5/8; Dell, up 3 1/8 to 56 1/2; Motorola, up 2 7/8 to 56 3/8; Computer Associates, up 3 to 62 7/8; and Ascend Communications, up 3 to 69.
* Among telecommunications-related issues, Nokia rose 3 1/4 to 57 1/4, DSC Communications added 1 1/2 to 19 1/8 and L.M. Ericsson was up 1 1/8 to 30.
* Many non-technology growth stocks also rallied, as investors bargain-hunted. Hotel franchiser HFS jumped 3 3/8 to 60 5/8, Mattel gained 7/8 to 30 3/4, Pacific Sunwear leaped 2 5/8 to 23 1/2 and DeVry soared 4 to 42.
* Oil stocks gained with energy prices. Exxon rose 3/4 to 97 1/4, Amoco was up 1 1/2 to 79 and Noble Affiliates surged 2 to 47 3/4.
* Genetics Institute soared 22 7/8 to 84 5/8 on the heels of American Home Products’ announcement that it will pay 85 a share for the 40% of Genetics it doesn’t already own. The news also lifted other biotech shares, including Genelabs Tech, up 2 1/8 to 6 1/4; Centocor, up 2 1/2 to 34 3/4; Agouron Pharmaceutical, up 3 7/8 to 61 1/4; and Immunex, up 1 9/16 to 16 3/8.
* Brokerage stocks rallied after Goldman Sachs said its fourth-quarter earnings surged 69% to $743 million, raising expectations for other firms. Morgan Stanley rose 3/4 to 56 3/4, Dean Witter Discover gained 7/8 to 66 7/8, Merrill Lynch shot up 2 1/8 to 80 1/8 and Alex. Brown surged 3 1/8 to 65 1/4.
In foreign trading, Mexican stocks continued their latest advance, with the Bolsa index rising 19.19 points to 3,273.16. But Japanese stocks fell to nine-month lows. (Investor Spotlight, D8.)
