Small Stocks Fuel Solid Rise in Nasdaq
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For all the hoopla surrounding Monday’s record high for the Dow Jones industrial average, smaller stocks ruled the day.
The resurgent technology sector roared, catapulting the Nasdaq composite index up 33.91 points, or 2.6%, to 1,339.24, its second straight gain of more than 2.5%.
The Russell 2,000 index of smaller shares rose 8.45 points, or 2.4%, to 362.43.
The Dow, meanwhile, surged 143.29 points, or 2%, mostly in the final hour of trading, closing at 7,214.49, its first close about 7,200. (Story, A1.)
Also setting new highs: the S&P; 500 and the NYSE composite indexes. Advancing issues beat losers in the broad market by 3 to 1 in heavy trading.
The buying wave followed Friday’s surge in share prices after a week of generally favorable economic data and news of a balanced-budget deal between President Clinton and Republicans.
“We have low inflation, big [corporate] profits and people have money to spend,” said Dan Ryczek, money manager at Loomis, Sayles & Co. “Three weeks ago, we were trying to figure out if this was a correction or a bear market. Now we’re hitting new highs.”
Tobacco stocks helped fuel the late burst on the Dow, lifted by news that a Florida jury ruled in favor of R.J. Reynolds in a closely watched wrongful-death suit.
Trading was so fast and furious, in tobacco stocks especially, that final closes for key stock indexes were delayed one hour.
There were no major economic reports to bolster or dampen last week’s sudden enthusiasm. Bond yields held generally steady for the day, with the benchmark 30-year Treasury bond yield easing to 6.87% from 6.88%, hovering near eight-week lows.
Many analysts see smaller stocks continuing to lead the market higher, especially given prospects for a capital gains tax cut. That would favor smaller issues because more of their returns come from price appreciation than from dividend income.
Among Monday’s highlights:
* A verdict in a tobacco liability lawsuit sent Dow component Philip Morris up 4 1/8 to 44. The case involved RJR Nabisco, which rose 3 1/8 to 32 5/8.
* Most tech issues continued to lead the market higher. Cisco Systems added 1 5/8 to 58 7/8 in advance of today’s earnings announcement.
Other big winners included IBM, up 4 to 166 1/8; Motorola, up 3 to 63 1/8; BMC Software, up 5 to 50 1/2; and Intel, up 4 7/8 to 162 1/2.
Also, Computer Sciences rose 1 to 67 7/8 after reporting strong quarterly results.
* American Home Products rose 3 5/8 to 70 1/4 after rivals Duramed Pharmaceuticals and Barr Laboratories failed to win FDA approval to market generic versions of American Home’s estrogen-replacement drug. Barr fell 6 5/8 to 43 1/4.
In commodity markets, gold prices rose partly on news that the supposedly huge Busang gold deposit in Indonesia would not pan out. June gold at the Comex closed at $344.30 an ounce, up $2.70.
Market Roundup, D12
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