Blue Chips Rise Again but Nasdaq Closes Off

The Dow Jones industrial average on Wednesday recouped another chunk of its recent slide, but investors remained too nervous to bet on anything but big companies.

The blue-chip Dow, which had slid nearly 700 points in the five weeks before this week’s rally, jumped 92.71 points to 6,679.87, bringing its three-session rebound to 288 points.

But the Nasdaq market sagged again as the battered technology sector continued to struggle. And on the New York Stock Exchange, winners topped losers by just 14 to 10, a much narrower margin than on Tuesday.

“This appears to be a very narrow but very powerful buying frenzy in the biggest of the bigs and the bluest of the blues. If you’re not in that exclusive club, you’re probably not doing so well today,” said Robert Streed, senior investment advisor at Northern Trust in Chicago.

The rebound “may just turn out to be a bounce off the lows. The lack of volume and the lack of breadth makes me wonder if this is sustainable,” Streed said.

News that major tobacco companies were negotiating with state attorneys general to settle massive liability lawsuits drove those stocks sharply higher.

Also, some investors flocked to heavy-industry stocks, apparently on the assumption that the economy’s strength will mean improving earnings for those firms.

Sentiment toward industrial issues may have been helped by the government’s report Wednesday that industrial output surged 0.9% in March, straining capacity at many factories.

That news hurt the bond market, however, by suggesting that inflationary pressures could be building. The yield on the bellwether 30-year Treasury bond rose as high as 7.15% from Tuesday’s close of 7.09%.

But higher yields brought buyers into the bond market, and the 30-year T-bond yield fell back to 7.09% by the close.

Some analysts said blue-chip stocks’ ability to rally this week even without a meaningful drop in bond yields suggests that the market’s pullback may have ended.

“We may have made a decisive bottom” last week, said Eugene Peroni, analyst at brokerage Janney Montgomery Scott in Philadelphia. Even so, he said that investors’ wariness about taking big risks may keep them away from smaller stocks on the Nasdaq market until perhaps summer.

On Wednesday, weighed down by fresh declines in many tech issues, the Nasdaq composite index lost 2.61 points to 1,210.27. Still, it remains above its recent closing low of 1,201.00 reached on April 2.

Among Wednesday’s highlights:

* Industrial issues rising sharply included Ford Motor, up 1 5/8 to 34 7/8 after reporting earnings; Alumax, up 1 5/8 to 37 3/8; AlliedSignal, up 2 3/8 to 71 1/8; GE, up 2 1/2 to 105 3/8; Cummins Engine, up 1 5/8 to 52 1/2; and Nucor, up 1 1/4 to 46 1/2.

* Tobacco stocks zoomed on talk of a possible liability settlement. (Chart, D1.)

* In the tech sector, strong earnings reports were no help to Compaq Computer, which fell 1 1/4 to 73 3/8; and Sun Microsystems, which lost 1 15/16 to 27 7/16.

Also, software firm Clarify plummeted 9 3/4 to 7 after it said it expects little or no revenue growth in the second quarter. Rival Remedy slumped 7 12/16 to 32 11/16.

And wireless communications firm Qualcomm fell 4 to 50 5/8 after a California court dismissed an unfair competition lawsuit filed against rival Ericsson.

* Financial stocks also weakened again. J.P. Morgan lost 3/4 to 96 1/2, Wells Fargo was off 3/8 to 257 1/2 and BankAmerica tumbled 2 1/4 to 103 7/8. Charles Schwab sank 2 1/8 to 32. It reported higher earnings but said current-quarter revenue could be modestly lower.

Market Roundup, D6