Dow Jumps 78 to Record; Bonds Steady
A stable bond market and a rebound in energy and drug stocks helped propel key blue-chip indexes to new highs Monday.
The Dow Jones industrials surged 78.50 points, or 1.1%, to a record 7,079.39, topping the previous high of 7,067.46 set Feb. 18.
The broad market also was fairly strong, even though most other stock indexes lagged the Dow’s gain.
The Nasdaq composite index of mostly smaller stocks added 10.92 points, or 0.8%, to 1,322.72, helped by bargain hunting in the technology sector.
Winners topped losers by 21 to 19 on Nasdaq, and by a much stronger 17 to 9 on the New York Stock Exchange.
Still, select blue chips were clearly the investments of choice once again on Monday. “It looks like the big boys are back buying the big stocks,” said Alan Ackerman, market strategist at Fahnestock & Co., commenting on the Dow’s continuing advance.
“Investors are seeking certainty,” said A.C. Moore, chief investment strategist at Principal Financial Securities/Dunvegan Associates, which oversees about $100 million. “They’re showing less willingness to move to the edge.”
The relative calm in the bond market Monday, following Friday’s rally in the wake of the February employment report, provided an excuse for stock investors to make their moves, some traders said.
The yield on the benchmark 30-year Treasury bond was unchanged from Friday at 6.81%.
Stocks, too, had rallied on Friday after the government reported strong job creation in February, but smaller-than-expected wage gains.
Bullish analysts said the report signals that the U.S. economy’s remarkable record of growth with low inflation remains on track.
“We’ve got a strong economy, decent earnings and inflation is very, very quiet,” said Robert W. Bissell, president and chief investment officer of Wells Capital Management, which oversees $38 billion. “Those are three powerful drivers of the equity market.”
Even so, some economists worry that the Federal Reserve Board may decide to make a preemptive strike against inflation by raising short-term interest rates slightly on March 25, when the central bank meets.
“We have moved to a much more cautious position,” said Steve Guterman, who manages $3.5 billion in bonds for Salomon Brothers Asset Management. “Unless we see further weakness in the economy, [the Fed] will tighten” credit, he said.
But for now, the rebounding stock market doesn’t seem to think that’s going to happen.
Among key indexes, the NYSE composite rose 3.87 points to a record 427.70 Monday, besting the Feb. 18 record of 427.07.
Among Monday’s highlights:
* Energy stocks helped pace the Dow. Exxon shot up 2 5/8 to 103, Chevron gained 1 1/4 to 67 3/8 and Texaco added 2 to 105. All three are among the Dow 30 stocks.
* Recent weakness among drug issues afforded a buying opportunity. Merck gained 2 3/8 to 95 3/8, Warner-Lambert soared 5 to 88 1/2 and Pfizer jumped 2 3/4 to 96 7/8.
Warner-Lambert was boosted by optimism that sales of its new anti-cholesterol drug, Lipitor, will be significant.
* Big-name tech issues were among the strongest gainers. Microsoft was up 3 1/4 to 100, Compaq gained 2 5/8 to 79 and Texas Instruments was up 1 3/8 to 85 1/4.
Even Cisco Systems finished strongly, up 2 to 53 3/8, after starting lower on a downgrade from PaineWebber. But Electronic Arts tumbled 2 5/16 to 29 3/16 after an analyst’s downgrade.
* Some airline issues continued to attract buyers. US Airways (formerly USAir) leaped 2 1/2 to 24 7/8 and Northwest gained 2 3/8 to 40 1/4.
* Among Southland issues, La Jolla Diagnostics said it couldn’t explain the jump in its stock, which soared 27/32 to 1 7/16 on the Nasdaq Bulletin Board in heavy trading.
