Late Rebound Lifts Dow; Tech Issues Struggle
Blue-chip stocks roared back from big early losses to end higher Monday, but technology and smaller-company shares slid in nervous trading as long-term interest rates crept toward 7% in the bond market.
The revamped Dow Jones industrial average rose 20.02 points to 6,955.48 after recovering from a loss of more than 80 points.
But the broader market was mostly lower. Declining issues beat advancers by a nearly 2-1 margin on the New York Stock Exchange.
Monday’s trading marked the debut of four new components in the 30-stock Dow, as the world’s most closely watched stock index became less smokestack- and more technology-oriented.
Added to the list were computer maker Hewlett-Packard, drug maker Johnson & Johnson, Wal-Mart Stores and insurance company Travelers Group. Dropped were Bethlehem Steel, Westinghouse Electric, Texaco and Woolworth.
While the Dow rallied late in the session, the technology-laden Nasdaq composite index recovered only about half of a nearly 28-point plunge, ending down 13.54 points at 1,279.43.
The Standard & Poor’s 500-stock list rose 2.54 points to 795.71 after falling more than 10 points earlier in the session. The NYSE composite index, also dominated by larger companies, turned positive late in the day, rising 0.67 point to 418.37.
The weakness in the broader market underscored how eager investors were to take profits before the March 25 meeting of Federal Reserve Board’s policy-setting committee, analysts said.
High-tech stocks “have lost momentum, and nobody’s willing to step up here,” said Guy Truicko, equity portfolio manager at Unity Management. “All eyes are on next week’s Fed meeting.”
In a sign of stocks’ sensitivity to interest rates, the Dow index rebounded sharply in late trading when the price of the benchmark 30-year Treasury bond rebounded after briefly hitting the psychologically important 7% level. Long-term bond yields of 7% tend to draw funds from stocks to bonds.
The long bond’s yield, which hasn’t been above 7% since September, settled at about 6.95%, up from Friday’s 6.94%.
Wall Street was rattled from the opening by billionaire financier Warren Buffett’s comment in his annual letter to stockholders that most stocks are over-valued.
“Buffett is a sage a lot of people take to heart,” said Peter Coolidge, senior equity trader at Brean Murray & Co.
Harry Laubscher, an analyst at Tucker Anthony, said stocks tend to rise heading into a triple expiration of equity and index options and index futures, which is due Friday.
Among Monday’s highlights:
* The new components of the Dow index got off to an inauspicious start. HP rose 1/4 to 55 5/8, Travelers lost 1 3/8 to 51 7/8, J&J; ended unchanged at 57 7/8 and Wal-Mart rose 1/4 to 28 7/8.
* The heavy selling among tech issues sent IBM sliding 4 1/8 to 139 1/2 as the Dow’s weakest issue.
Other tech issues lost, including Intel, down 1 1/2 to 136 3/8; Cisco Systems, down 1 7/16 to 49 1/8; and Tellabs, down 2 7/16 to 35 11/16.
* The Dow also was weighed down again by Philip Morris, which fell 2 1/2 to 126 5/8 after the Supreme Court rejected an industry challenge to a Florida law that makes it easier for the state to sue for Medicaid money spent to treat smoking-related illnesses. Among other tobacco shares, RJR Nabisco fell 1 1/8 to 32 3/4; UST declined 4 1/8 to 29 1/4; and Loews lost 1 5/8 to 102.
* Drug makers gained. Bristol-Myers Squibb rose 5 1/8 to 67 3/8 and Merck gained 2 3/4 to 91 1/8.
* A number of credit card companies declined after Advanta, down 8 1/2 to 31 7/8, said it would report its first quarterly loss in nine years because of higher-than-expected defaults.
American Express fell 3/4 to 63 3/4. Money Store dropped 3/4 to 25 3/8, First USA retreated 5/8 to 49 1/4 and Capital One Financial lost 1 5/8 to 37 1/2.
Overseas, Tokyo’s Nikkei stock average rose 0.7%, Frankfurt’s DAX index fell 0.2% and London’s FTSE-100 fell 1.2%.
