U.S. Stocks Hit New Highs; Japanese Market Plummets
Most major U.S. stock indexes jumped to new highs Wednesday amid fresh signs of strong economic growth and low inflation. Meanwhile, Japan’s market plummeted on growing pessimism about that country’s economy.
On Wall Street, the Standard & Poor’s 500 index of blue-chip stocks kicked off the first day of the second quarter by rising 6.40 points, or 0.6%, to a record 1,108.15, topping the previous peak of 1,105.65 reached March 24.
The S&P; was paced by many classic growth stocks, including Coca-Cola, up $3.19 to a record $80.63, and Procter & Gamble, up $3.19 to $87.63.
The Dow Jones industrials gained 68.51 points, or 0.8%, to 8,868.32, shy of the record 8,906.43 set Friday.
But nearly every other U.S. index reached a record, amid heavy trading. The Nasdaq composite gained 0.7% to 1,847.66; the Russell 2,000 index of smaller stocks rose 0.9% to 484.93.
Stocks were bolstered by reports indicating that the U.S. economy continues to turn in a spectacular performance--growing at a healthy pace, with a surprising absence of inflationary pressures.
The news allowed the bond market to rally, which in turn supported stocks. The yield on the bellwether 30-year Treasury bond fell to its lowest level since March 24, closing at 5.88%, down from 5.93% on Tuesday.
Stock and bond markets both were helped by typical beginning-of-the-quarter money flows into pension funds and other accounts. After stocks’ strong gains in the first quarter--when the Dow index rose 11.3%--there is heavy pressure on money managers to stay fully invested, analysts say.
The appeal of the U.S. market is strong for foreigners as well: The dollar continued to rise Wednesday against the Japanese yen and German mark, reaching 1.852 marks and 133.68 yen--the latter nearly a six-year high.
The yen is weakening as worries about the Japanese economy rise. The latest Japanese survey of business managers, released Wednesday, showed plunging confidence.
That triggered another decline in the Nikkei-225 stock index, which dropped 1.7% to 16,241. By midday today, the Nikkei was in full-scale retreat, down 449.45 points, or 2.8%, to 15,792--the lowest since Jan. 14.
Eisuke Sakakibara, the Japanese Finance Ministry’s vice minister for international affairs, said Wednesday that Japan is “strongly concerned” about the yen’s recent weakness against the dollar. Although a weak yen will help Japanese exports, it makes dollar-denominated investments more attractive to Japanese as the dollar strengthens.
In the U.S. stock market, meanwhile, bullishness is rising: The latest survey of investment newsletters by Investors Intelligence found the percentage of advisors who consider themselves bullish has risen to 53.2%--the highest level of optimism since January 1997.
But analysts noted that rising bullishness in that survey often is a “contrary” indicator--suggesting the market is nearing a pullback.
Among Wednesday’s highlights:
* Coca-Cola led consumer growth stocks higher. The company on Monday said its unit sales volume worldwide was running well ahead of expectations.
Other consumer winners Wednesday included PepsiCo, up 94 cents to $43.63; Avon Products, up $2.50 to $80.50; Gillette, up $3.69 to $122.38; Unilever, up $2.94 to $71.56; and Clorox, up $1.38 to $87.31.
* Retail stocks were also strong as investors bet that consumer spending will remain healthy. Mercantile Stores gained $1.31 to $68.50, J.C. Penney rose $1.81 to $77.50, Sears jumped $1.31 to $58.75 and Kmart leaped $1.56 to $18.25.
* Energy-related stocks rebounded, continuing their seesaw pattern. Exxon gained $1.31 to $68.94 and Halliburton jumped $2.06 to $52.19.
* Amid the rally, there were more reminders that many companies’ earnings are under pressure. UAL, parent of United Airlines, sank $2.69 to $90.25 after saying sales for the first quarter and full-year 1998 may fall below expectations because of reduced business in Asia.
And computer retailer CompUSA plunged $5.13 to $21 after warning that earnings would be disappointing because it is selling more low-priced computers.
* Despite CompUSA’s announcement, many tech issues continued to rally. Internet-related stocks were hot after Lycos, an Internet search firm, said it signed contracts for $30 million in new advertising contracts. Lycos soared $6.88 to $51.13.
Other winners included America Online, up $4.63 to $72.94; EarthLink, up $2.69 to $59.13; Cadence Design, up $2.38 to $37; and ISS Group, up $5.81 to $44.69.
* Northrop Grumman gained $1.94 to $109.38 and Lockheed Martin rose $2.13 to $114.63. Lockheed in recent days has scored some minor legal victories in its antitrust fight with the government to buy Northrop.
* Tobacco stocks continued to sink on fears that Congress will abort a deal to offer the cigarette industry immunity from future health-related lawsuits. Philip Morris slid $1.75 to $39.94, the lowest since October.
Market Roundup, D8
