Dow Shrugs Off Profit Reports; Yields Decline
Some healthy profit reports failed to impress blue-chip stocks, but the market struggled higher Tuesday as the bond market ended a short bout of inflation jitters, sending interest rates back toward last week’s 1 1/2-year lows.
The Dow Jones industrial average swung from an early 40-point gain to a 53-point loss before reversing course to close with a gain of 24.07 at 8,096.29.
Broader stock indicators were mixed, with investors displaying a rare preference--by recent standards--for blue-chip issues over smaller-company shares.
Technology stocks put in a weak performance as a strong profit showing from Texas Instruments failed to set an upbeat tone for Tuesday’s main event, a third-quarter profit report from Intel, the bellwether of the semiconductor group.
After the markets closed, Intel reported a 21% improvement in third-quarter profit, but the results came in slightly shy of many Wall Street forecasts. Intel had slipped 75 cents to $91.81 in active Nasdaq trading before the report.
The Nasdaq composite index was off 9.33 points at 1,732.79.
“One of the legs of this bull market has been the earnings picture and Intel is one of the lead sled dogs. They are a benchmark company and they indicate the sustainability of rapid earnings growth in the technology area,” said Joseph Barthel, chief investment strategist at Fahnestock & Co.
Federal Reserve Board Chairman Alan Greenspan, speaking at Connecticut University, offered no general comments on the stock market but talked about the technology sector, saying it is “understandable” that technology companies have “particularly elevated stock market values.”
He also said Southeast Asian governments, not speculators, are primarily to blame for the recent currency troubles in that region.
“Greenspan’s commentary was relatively benign, so he didn’t throw more wood on the fire,” said Joe Battipaglia, chief investment strategist at Gruntal & Co., alluding to renewed fears the Fed will boost interest rates to slow the economy and ease inflationary pressures.
A drop in weekly retail sales reported by both BTM/Schroders and Redbook Research lifted the bond market.
The 30-year Treasury bond rose nearly a full point, lowering its yield to 6.35% from Friday’s close of 6.42%. The bond market was closed Monday for the Columbus Day holiday.
On Friday, bonds plunged to end their worst week in two months, after a government report showed a jump in producer prices.
At the stock market, advancing issues barely outnumbered decliners on the New York Stock Exchange in heavy trading.
The Standard & Poor’s 500-stock list rose 2.18 to 970.28, and the NYSE composite index rose 1.17 to 508.57.
The Russell 2000 index of smaller companies fell 1.24 to 463.97, snapping a three-session streak of record highs.
Among Tuesday’s highlights:
* Of the Dow components reporting quarterly results, General Motors fell $1.06 to $70.38, Johnson & Johnson was unchanged at $60.63, and Eastman Kodak rose $1.13 to $64.69.
* Semiconductor issues slid, even after Texas Instruments posted strong quarterly profit on strong demand for specialized computer chips. TI plunged $5.44 to $135.56.
VLSI Technology slipped $3.19 to $73.63. Compaq Computer slid $2.81, Hewlett-Packard dropped 38 cents to $68.06 and IBM slipped $1.19 to $103.31.
* Mergers and acquisitions continued to dominate headlines. Network General rose 94 cents to $24.31 after McAfee Associates disclosed late Monday that it will buy the company for about $1.3 billion in stock. McAfee tumbled $6.56 to $59.81.
* Airlines, shipping companies and trucking companies were among the biggest gainers. Delta Air Lines surged $3.06 to $104.63 on strong earnings projections.
Airborne Freight climbed 94 cents to $67.81, UAL rose $2.50 to $94.38, Caliber System rose 94 cents to $59.19, US Airways Group rose 6 cents to $47.81 and Federal Express rose $1.25 to $75.75.
Overseas, Tokyo’s Nikkei stock average rose 0.6%, Frankfurt’s DAX index fell 0.7% and London’s FTSE-100 edged lower.
*
Market Roundup, D10
