Dow Closes In on 7,000 Mark, Paced by Rally in Tech Stocks

From Times Staff and Wire Reports

A powerful rally swept blue-chip shares to record highs Wednesday, as investors shrugged off recent weakness in key stock groups and focused on corporate earnings growth and mutual fund cash inflows.

The Dow Jones industrials rocketed 103.52 points, or 1.5%, to a record 6,961.63, easily topping the previous record close of 6,883.90 set Jan. 21.

The broad market also was sharply higher, with the technology-heavy Nasdaq composite index soaring 27.45 points, or 2.1%, to 1,358.96, recouping nearly half its recent losses.

Meanwhile, the dollar continued to surge, which analysts said was potentially bullish for U.S. stocks because it could draw in more foreign investment.


Yet the strong dollar is also helping to power many foreign stock markets to new highs, because foreign firms’ products become cheaper in the United States as foreign currencies weaken.

Key stock indexes hit record highs Wednesday in France, Germany, Indonesia, Mexico and Switzerland, among other countries. Taiwanese stocks hit seven-year highs, and even the beleaguered Japanese market rallied, reaching a five-week high, with the Nikkei-225 index rising 1.3% to 18,410.

In U.S. trading, buying was triggered in part by Applied Materials’ earnings report. The company, which is an important producer of semiconductor manufacturing equipment, reported better-than-expected results for the recent quarter and boosted its sales and earnings expectations for this year.

The report encouraged investors because it suggested underlying strength in the technology industry, which has been dogged in recent weeks by concerns that sales and earnings growth are slowing this year after several sensational years.


“People still think this market can deliver on earnings,” said James Margard, chief equity officer at Rainier Investment Management, with $3.5 billion in assets. “The fear that dominated this market [in recent sessions] is giving way to opportunity.”

Indeed, some of the computer networking stocks that had been beaten up over the last week were up sharply Wednesday.

The market also drew strength from a report showing heavy cash inflows into stock mutual funds in January and continued heavy buying this month, as individual investors shift more of their savings into the stock market.

By the closing bell, winners swamped losers by 18 to 8 on the New York Stock Exchange and by 23 to 18 on Nasdaq, in heavy trading.

The Standard & Poor’s 500 index leaped 13.18 points, or 1.7%, to 802.77, crossing the 800 level for the first time.

For the Dow, which now is up 8% year-to-date, Wednesday’s rally added to the spectacular gains racked up over the last two years. The index now is a mere 0.6% rise from the 7,000 mark. It crossed 6,000 for the first time just four months ago.

Despite concerns that stocks are overdue for a sharp pullback, the market continues to see good news in bad news. The dollar’s strength, for example, hurts U.S. multinational companies’ overseas earnings, but it could also draw more foreign buyers to U.S. stocks.

The dollar, again ignoring Western nations’ decree last weekend that the currency had risen enough, rose 1.02 Japanese yen to 124.17 in New York on Wednesday, and to 1.688 German marks, up from 1.679 on Tuesday.


Among Wednesday’s highlights:

* Blue chips leading the Dow higher included Merck, up 2 7/8 to a record 95 7/8; Boeing, up 2 7/8 to 109 5/8; United Technologies, up 2 1/2 at 76 1/2; and Eastman Kodak, up 2 3/8 to 92 3/4.

* In the tech sector, Intel soared 5 to 156 3/4, National Semiconductor jumped 2 1/8 to 25 3/8, Seagate jumped 3 5/8 to 51 3/4, Ascend Communications rose 4 to 64 3/8 and 3Com added 2 1/2 to 40. But IBM was a loser, off 1/4 to 145.

* Many energy stocks rebounded as investors sought to capitalize on a recent decline in the stocks. Mobil surged 2 3/4 to 130 1/4, Transocean Offshore rose 2 to 57 5/8 and Exxon gained 1 3/8 to 103.

* Telephone stocks also attracted buyers. Nynex rose 1/2 to 53 1/4, Ameritech jumped 1 1/2 to 62 7/8 and BellSouth gained 1 1/2 to 46 5/8.

* Among industrial issues, Kimberly-Clark jumped 2 1/8 to 102, Ford Motor added 1/2 to 32 3/4, Lockheed Martin gained 1 7/8 to 91 5/8 and Emerson Electric advanced 2 to 104.

In the bond market, yields were little changed for a third day as the Treasury met lukewarm demand for the $12 billion of 10-year notes sold Wednesday.

The Treasury sold the notes at an average yield of 6.37%. But demand was the weakest since May 1995, as measured by the bid-to-cover ratio--the dollar amount of bids received divided by the securities sold. The ratio at Wednesday’s sale was 1.90, compared with an average of 2.27 at the last 10 sales of 10-year notes.


The benchmark 30-year T-bond yield was unchanged at 6.70% ahead of today’s Treasury auction of new 30-year bonds.


Market Roundup, D6

* POWERING UP: Shares of chip equipment maker Applied Materials jumped 16%. D2