Dow Soars 173 But Smaller Stocks Struggle
Wall Street’s big party Tuesday looked to be an invitation-only affair--with most smaller stocks left out, once again.
The Dow Jones industrial average’s 173.38-point surge, a 2.6% gain to 6,833.59, wasn’t tracked by the majority of smaller stocks.
Falling stocks outnumbered winners by 22 to 18 on the Nasdaq market. And even on the New York Stock Exchange, breadth wasn’t great: Winners topped losers by 15 to 10.
Still, Big Board volume rose to 498 million shares. And battered technology issues did get a lift, boosting the Nasdaq composite index 8.79 points to 1,212.74.
That suggested that a continuing rise in the Dow might lift the rest of the market, some analysts said.
But “the quality of the rally says we’ve got some more work to do. The market is not ready to go up, up and away,” said Alfred E. Goldman, a securities analyst at A.G. Edwards & Sons of St. Louis and a noted optimist about the market’s long-term prospects.
The Standard & Poor’s 500-stock list rose 14.24 points, or 1.9%, to 774.61 and the NYSE composite index rose 6.44 points, or 1.6%, to 405.84.
Analysts credited some strong earnings reports and lower interest rates for reigniting buyers’ interest in the market, after its recent slump.
Stocks spiked higher in the afternoon as long-term interest rates fell back toward 7% in bond-market trading. Faced with a drought of new economic data, investors had been reluctant to bid aggressively, particularly after last week’s big advance.
The Treasury market rallied Tuesday after successfully absorbing $17 billion in new two-year notes from a government auction. The government sold the notes at a yield of 6.46%, below the 6.48% yield forecast by bond traders.
Bonds were also helped by news reports that President Clinton and the Republican leadership of Congress may be nearing a balanced-budget agreement.
As bond prices rose, the benchmark yield on the 30-year Treasury bond fell to 7.04% from 7.09% Monday. A week ago, the long-bond yield rose to a nine-month high of 7.17% amid mounting inflation jitters.
Elsewhere, the dollar firmed after an important group of German economists predicted it would rally in coming months and U.S. negotiators reportedly neared a deal on the federal budget.
Despite the powerhouse performance by blue chips, analysts were wary of the mixed performance in the broader market. Indeed, buyers appeared extremely focused and largely shunned mid-sized and smaller companies.
“People are looking for companies with strong earnings and strong balance sheets,” said Alan Ackerman, market strategist at Fahnestock & Co. “Money is moving towards predictability rather than projections.”
Among Tuesday’s highlights:
* The Dow was driven higher by Procter & Gamble, up 5 5/8 to 128 5/8; General Electric, up 4 1/8 to 108 1/2, and 3M, up 4 3/8 to 97 1/2 after the reporting strong first-quarter profit.
The Dow’s only two decliners were AT&T;, down 7/8 to 32 1/8; and Philip Morris, down 1/2 to 42 1/8.
* Other companies advancing on positive quarterly results were Bristol-Myers Squibb, up 3 5/8 to 63 1/2; Chubb, up 3 3/4 to 56 1/2; Xerox, up 1 to 58 3/8.
* Transportation stocks also surged, pushing the Dow transports index to a record high.
* Nasdaq was helped as networking concerns steadied. 3Com rose 13/16 to 27 3/16 after cutting prices on two key products in response to Intel’s cuts on similar equipment; Cisco Systems rose 3/16 to 47 1/2; and U.S. Robotics rose 1 13/16 to 46 7/8. Intel rose 2 1/2 to 140 7/8.
* HFS fell 1 3/8 to 51 3/4 after reports that it was in talks to buy Montgomery Ward Holding’s Signature Group.
Overseas, Tokyo’s Nikkei stock average fell slightly and Frankfurt’s DAX index fell 0.2%.
