Blue Chips Rise Again as Bond Yields Edge Lower
Big-name stocks rolled up to new highs Tuesday as bond yields finished slightly lower, on news of a balanced-budget deal in Washington and a modest increase in workers’ compensation in the second quarter.
The Dow Jones industrial average rose 53.42 points to a record 8,174.53, the fifth record in the last six sessions.
Many broader stock measures also set new highs, as winners topped losers by 17 to 11 on the New York Stock Exchange.
But the Nasdaq market was relatively weak, with losers narrowly outnumbering winners. Still, the Nasdaq composite index added 8.79 points to 1,572.32.
Interest-rate-sensitive stocks paced Wall Street’s rally, on a double dose of good news: the bipartisan deal reached late Monday to balance the federal budget, and a government report Tuesday showing that labor costs rose 0.8% in the second quarter, in line with private economists’ forecasts.
Those reports helped push long-term bond yields to new seven-month lows, with the 30-year Treasury bond yield closing at 6.38%, down from 6.40% Monday.
Financial-services companies tend to perform best in times of stable or falling interest rates. In addition, the budget deal, in cutting capital gains taxes, is expected to spur more investment in financial markets and more corporate merger activity.
Among Tuesday’s highlights:
* Financial issues leading the rally included American Express, up $3.56 to $82.44; Citicorp, up $6.44 to $130.56; Wells Fargo, up $5.06 to $271; Salomon, up $1 to $58.69; and Merrill Lynch, up $2.69 to a record $69.13.
But SunAmerica lost $1.19 to $58.88. The proposed cut in capital gains taxes could make SunAmerica’s tax-deferred annuity products less interesting to investors, some analysts say.
* Nasdaq’s rise was paced by computer networker Ascend Communications, up $6.38 to $53.13 after the company gave a bullish outlook on sales.
Other tech gainers included Cisco Systems, up $1.88 to $79.25; 3Com, up $3 to $58; and Microsoft, up $2.94 to $139.94.
* Department store stocks were broadly higher on analysts’ upgrades. May Department Stores rose $1.50 to $56.56, Dayton Hudson surged $2.88 to $61.75 and Nordstrom gained $3.63 to $56.63. (Investor Spotlight, D8.)
* Transportation stocks were up sharply, led by airline stocks, on news of a new airline ticket tax plan in the balanced budget deal.
In foreign trading, Mexican shares surged, with the Bolsa index up 1.8% to 4,797.49.
In currency markets, the dollar climbed to a 2 1/2-month high against the Japanese yen, but pulled back slightly against the German mark.
The dollar settled at 118.43 Japanese yen in New York, its highest close since May 13 and up from 117.60 yen on Monday.
