Stocks Blow Past Their Records; Dow Up 135
Stocks jumped to record highs for the fifth straight session Thursday--and the Dow Jones industrial average sailed past not only 7,600 but 7,700--as investors all but buried their lingering worries about higher inflation and interest rates.
The Dow industrials surged 135.64 points to 7,711.47. It was the blue-chip index’s fifth-biggest daily point gain ever, but on a percentage basis, the 1.8% increase was nowhere near record proportions.
Nonetheless, in a market that historically gains about 10% a year, the Dow is up nearly 20% for the year so far, after gaining 26% in 1996 and 33% in 1995--remarkable evidence of the stock market’s bull run.
Broader measures of the market, including the Standard & Poor’s 500 index and the New York Stock Exchange composite index, also marched to new heights Thursday.
Analysts and investors were effusive in their praise but surprised at the gains, and the overwhelming sentiment to buy stocks is making them a little wary.
“Things couldn’t be better,” said Peter Canelo, an investment strategist at Morgan Stanley Dean Witter Discover. “But if that is the case, what comes next? We are counseling caution here.”
Once again, stocks rose in tandem with bond prices after retail sales figures indicated that economic growth is not so heated--and inflation not so threatening--that the Federal Reserve Board will soon be forced to raise interest rates.
“These numbers certainly bolster the case that the Fed will keep rates steady through their July meeting,” said James Solloway, research director at Argus Research.
The yield on the Treasury’s benchmark 30-year bond fell to 6.77% from 6.84% on Wednesday.
U.S. retail sales unexpectedly slipped 0.1% in May for a third straight monthly decline, countering economists’ average forecast of a 0.3% gain, the Commerce Department said. Sales fell a revised 0.9% in April, which was unexpectedly large, and 0.3% in March.
“The evidence of the ‘Goldilocks’ economy is building again,” said Thomas Galvin, chief equity strategist at Deutsche Morgan Grenfell, in reference to the economy being neither too hot nor too cold.
Investors certainly ignored any suggestion that the lackluster retail sales indicate the economy might be slowing down, which in turn might reduce corporate earnings growth.
“I am dumbfounded,” said Hugh Johnson, market strategist at First Albany Corp. “People are saying [the market is] overvalued, but none are willing to sell stocks to defend themselves. There is a reluctance to sell, a reluctance to let cash build up.”
Stocks also drew strength from an industry group’s report that cash inflows to stock mutual funds rose 18% in May to $18.5 billion. Early June investments were said to be substantial.
Overall, gainers led losers 5 to 3 on the New York Stock Exchange, where trading volume was a heavy 592.89 million shares, up from 513.74 million on Wednesday.
The S&P; 500 rose 13.91 points to 883.44, and the NYSE composite index gained 7.14 points to 460.64--both records for the fifth consecutive session.
The technology-laden Nasdaq composite index ended 3.47 points higher at 1,411.32, just shy of its record close of 1,412.04 set Monday. The index struggled for most of the day under pressure from struggling computer-related stocks.
Only two of the 30 Dow industrials fell. J.P. Morgan lost 1/2 to 109 1/4 after two investment firms cut their earnings projections for the bank holding company. The other loser was General Motors, which fell 1/2 to 56 7/8.
Other highlights:
* Big industrial stocks moved up on expectations of more economic growth. Caterpillar was up 2 1/4 at 105 3/4, DuPont rose 1 3/4 to 115 5/8 and IBM gained 1 to 88 1/8.
* Newly issued shares of apparel maker Polo Ralph Lauren made a strong debut, rising from an original price of 26 to close at 31 1/2. The issue led the Big Board in volume, with nearly 20 million shares changing hands.
* Many computer-related stocks fell on lingering concerns about soft demand. Besides IBM, Advanced Micro Devices fell 1 3/8 to 38 and Compaq lost 3 to 96 7/8. But Dell Computer gained 2 5/16 to 112 3/16.
Stock markets overseas also rose, with the Nikkei-225 index in Tokyo gaining 1.35%, the DAX index in Frankfurt adding 0.83% and the FTSE-100 in London up 0.69% to a new high.
In currency trading, the U.S. dollar snapped a weeklong decline with its biggest one-day jump against the Japanese yen in nearly two years.
In New York, the dollar rose to 114.25 yen from 111.20 on Wednesday. The gain came after Japan’s top foreign-exchange policymaker said the yen is too strong.
The dollar also rose to 1.7300 German marks--its highest level since May 5--from 1.7160 on Wednesday.
* LOWER GEAR
U.S. retail sales fell for a third month, and unemployment claims rose. D3
