Stocks in Broad Advance as Bond Yields Fall Again
Stocks rose strongly across the board Monday, powered by falling bond yields and a fresh rally in tech shares.
The Dow Jones industrial average climbed 79.56 points, or 1%, to 7,996.83, its best finish since Aug. 20.
In the broad market, winners topped losers by a 17-12 margin on the New York Stock Exchange and by 24 to 18 on Nasdaq.
The Russell 2,000 index gained 1.81 points, or 0.4%, to 448.98, the 16th record close in 18 sessions.
The Nasdaq composite also hit a record, rising 9.09 points to 1,689.45.
A strong bond market provided support for stock bulls. The yield on the bellwether 30-year Treasury bond dipped to 6.35% from 6.37%, and now is the lowest since July 31.
“The bond market has been a major force,” said George Jacobsen, who manages $1.3 billion as chief investment officer at Trevor Stewart Burton Jacobsen Inc.
“Bonds are looking good,” said Alan Day, who helps manage more than $1 billion at Stratevest Group in Burlington, Vt. “Most people are assuming the Federal Reserve’s not going to make any change” when its policymakers meet Sept. 30.
“We could see sub-6% yields on the long bond over the coming months,” said Helena Morrissey, who helps oversee about $4 billion of fixed-income securities at Newton Investment Management Ltd.
On Wall Street, IBM gave stocks a boost with its announcement that it has developed a way to use copper wiring instead of aluminum in computer chips, allowing it to make chips that can handle information more efficiently.
The first products will go in IBM’s mainframe computers, followed by processors for phone network switches and eventually for computer memory.
IBM jumped $4.63 to $103.88, nearing its 52-week high of $109.44.
Semitool, which has a prototype machine for making copper chips, soared $5.63 to $24.25 on Nasdaq.
“We tend to find a lot of growth stories among technology companies,” said John Hickman, who manages the Stagecoach Institutional Small Cap Fund and the Stagecoach Aggressive Growth Fund, which have about $350 million in assets. Recent purchases include Intel and Nokia.
Technological changes were seen adding to the long-standing arguments that companies can maintain the robust profit growth that has fueled 20%-plus gains in benchmark stock indexes for the last three years.
“There are an awful lot of opportunities out there,” said Bill Meehan, chief investment strategist at Cantor, Fitzgerald & Co. “You have a company like IBM--which many people have thought is no longer on the leading edge of technology--making some fairly important announcements.”
IBM’s resurgence may have helped bring buyers back to other battered blue chips, many of which have been pounded in recent weeks by concerns over the strong dollar’s effect on their earnings growth this quarter.
Blue chips’ weakness has left the Dow 3.2% below its record high of 8,259 reached on Aug. 6, even as smaller-stock indexes have hit new highs consistently.
Among Monday’s highlights:
* Blue-chip winners included Merck, up $4.25 to $102.88; J.P. Morgan, up $3.16 to $114.53; Johnson & Johnson, up $1.63 to $60.25; and American Express, up $1.31 to $81.13.
* Tech shares rallying with IBM included Dell, up $2.06 to $99.81; Micron Technology, up $3.13 to $40.50; Texas Instruments, up $5 to $139.63; and Computer Associates, up $3.69 to $72.69.
But Microsoft, the world’s largest maker of computer software, was an unusual laggard, dropping $1.88 to $133.31. Microsoft has been dogged by concerns that earnings growth is slowing as product introductions stall.
* Computer-networking-related stocks also were strong, led by Newbridge Networks, up $5.13 to $65.38; Advanced Fibre, up $4.25 to $74.75; Ortel, up $2.25 to $23.75; and 3Com, up $2.56 to $50.38.
* Internet-based bookseller Amazon.com continued to surge, rocketing $6.63 to $54 in what traders said is a classic “short squeeze,” wherein bearish traders who had sold the stock short now are being forced to buy shares in the open market to close out their wrong-way bets.
* On the downside, Informix plunged $2.09 to $7.34 after saying it may have to restate profits.
In foreign trading, Mexico’s market continued its recent strength as stocks soared to close at an all-time high, boosted by the drop in U.S. long-term interest rates and a recent series of favorable domestic and international economic news.
The Bolsa index zoomed 160.60 points, or 3.1%, to close at a record 5,278.73. The Bolsa had set its previous record of 5,212.89 on Aug. 6.
“We’ve had a string of good news. Basically the market is following its recent [upward] trend,” said Felix Boni, head of research for Mexico at ING-Barings, referring to the fact that the market had closed higher for the fourth session in a row.
The Canadian stock market also hit a record high on Monday.
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Market Roundup, D14
