Dow Resumes Its Climb Into Record Heights
Blue-chip stocks sprinted to another record high Tuesday, resuming last week’s fast-paced rise with the help of a flurry of merger activity.
The Dow Jones industrial average ended up 78.50 points at 7,067.46 after closing above the 7,000 level for the first time last Thursday.
Philip Morris led the gains, rising 5 3/4 to an all-time high of 131 1/4 amid speculation that cigarette makers will negotiate a broad settlement of pending tobacco-related litigation.
The Standard & Poor’s 500-stock list and the New York Stock Exchange’s composite index also hit new highs Tuesday, while the Nasdaq composite index was the only loser for the day.
“We are seeing selected stocks that are extremely strong and that’s behind much of this late-day rally,” said Anthony O’Bryan, a market analyst at A.G. Edwards & Sons in St. Louis.
Analysts said a number of factors played into the rally, including the flurry of recent merger deals, and, somewhat ironically, a heightened sense of caution about the market.
“People are cautious,” said Peter Coolidge, senior equity trader at Brean Murray & Co. “People are buying quality. People are buying more liquid names.”
Keeping with a recent trend, the session was fairly uneventful until the final moments, when a wave of program buying propelled the Dow sharply higher.
Analysts said the dollar’s recent strength also figured in the stock market’s rally.
The dollar ended slightly lower against the Japanese yen, settling in New York at 123.88 yen, down from 124.22 on Friday.
But the price of U.S. bonds declined as investors questioned whether the January consumer price index, to be released today, will provide more evidence of slow inflation.
The yield on the benchmark 30-year bond yield rose to 6.54% from Friday’s 6.53%. U.S. markets were closed Monday for the Presidents Day holiday.
The day’s trading session was marked by a spate of merger news led by H.F. Ahmanson’s surprise $6.5-billion stock offer to buy Great Western Financial, whose stock surged 10 5/8 to 44 7/8.
H.F. Ahmanson shares also jumped after news of the offer, up 4 3/8 to close at 44 7/8.
Advancing issues outnumbered decliners by a 13-to-9 margin on the New York Stock Exchange.
The Standard & Poor’s 500-stock list rose 7.81 points to a record 816.29, and the NYSE’s composite index rose 3.59 points to an all-time high of 427.07.
The Nasdaq composite index fell 1.40 to 1,365.79.
Among Tuesday’s highlights:
* In addition to Philip Morris, leading the Dow’s advance were J.P. Morgan, up 2 3/4 to 109 1/2, and Procter & Gamble, up 4 5/8 to 129 1/2.
Other tobacco stocks also gained. RJR Nabisco Holdings rose 1 7/8 to 37 3/8 and UST rose 1 to 31 3/4.
* The day’s other merger news included Marriott International’s agreement to acquire Renaissance Hotel Group for $1 billion in cash, overriding an $890-million bid by Doubletree. Marriott gained 1 to 56 1/4 and Renaissance rose 4 5/8 to 29 3/4, while Doubletree’s stock added 2 1/2 to 43 1/8.
Horizon/CMS Healthcare rose 2 1/4 to 16 1/2 after agreeing to a stock swap acquisition by HealthSouth, whose stock fell 2 1/8 to 41.
Destec Energy rose 1 to 20 1/2 after AES and NGC said they will pay $1.27 billion for the independent power producer.
* Technology shares didn’t participate in the broad market’s rally. Digital Equipment fell 5/8 to 33 1/2 after its 1997 earnings estimate was cut.
Microsoft lost 1/2 to 97 3/8 and IBM, which is down 5% this year on concern that a strong U.S. dollar will cut into profit from overseas sales, was unchanged at 145.
* WMX Technologies rose 1 3/4 to 34 5/8 after Chief Executive and President Phillip Rooney resigned, effective immediately, amid mounting pressure from shareholders who felt the company has performed poorly under his stewardship.
* Centennial Technologies fell 13 3/8 to 3 1/8 after the company said it defaulted on lending agreements and warned it may be unable to pay its bills.
Overseas, Tokyo’s Nikkei stock average fell 1.5%, Frankfurt’s DAX index rose 1.3% and London’s FTSE-100 fell 0.1%.
