Finance Stocks Power Dow Beyond 9,000
The Dow Jones industrial average on Monday made its first-ever close above 9,000, but it wasn’t particularly pretty.
The blue-chip index gained 49.82 points to end at a record 9,033.23, but the gain was almost entirely thanks to surging prices of three large financial-services stocks in the 30-stock Dow.
The broad market was weak overall, with many major indexes losing ground. The Nasdaq composite index tumbled 26.26 points, or 1.4%, to 1,829.14, weighed down by selling in the technology group.
Still, the Dow’s crossing of its ninth “millennium” mark was another reminder of how spectacular stocks’ gains have been in the now 7 1/2-year-old bull market, which began in October 1990 with the Dow at 2,365.
The market’s run has accelerated over the last three years in particular. The Dow crossed 7,000 in February 1997 and 8,000 last July. Of course, each 1,000-point move is a smaller percentage move: The rise from 7,000 to 8,000 was a 14.3% gain, while the rise from 8,000 to 9,000 was a 12.5% gain. From here, the Dow must rise 11% to cross 10,000. That is the equivalent of a $2.75 rise in a $25 stock.
In the short term, however, many analysts are concerned about the potential for a pullback. The Dow has risen 14.2% so far this year.
The broad market betrayed investors’ nervousness on Monday, despite the supportive news of the planned Citicorp-Travelers marriage. Losers outnumbered winners by 17 to 13 on the New York Stock Exchange and by 25 to 18 on Nasdaq, although trading was relatively subdued.
“The big merger news is driving financial shares higher, but the next couple of weeks are going to be a difficult period for the market,” said Bruce Simon, chief investment officer at Glenmede Trust Co. in Philadelphia, which oversees $13 billion. “We’re getting into earnings season, and we know that results are going to be weak.”
Indeed, expectations now are for virtually no year-over-year growth for total first-quarter earnings of the blue-chip Standard & Poor’s 500 companies.
Hurt by Asia’s woes, rising wage levels and fierce competition, many big-name companies have already warned that the quarter’s results will be disappointing.
On Monday stocks were weakened by a turnaround in bond yields, which had slid last week on news of weaker U.S. job growth in March.
The 30-year Treasury bond yield rose to 5.82% from 5.79% on Friday. Traders said the bond market was worried about South Korea’s planned sale of $3 billion of bonds this week in its first international debt sale since the Asian currency crisis began.
The tech stock group came under pressure on rumors that Microsoft might be the target of a new federal antitrust probe, and on news that National Semiconductor plans a new chip that could drive personal computer prices sharply lower, threatening rival Intel and others. Microsoft dropped $3.06 to $89.94.
Analysts also are concerned about shrinking cash levels at mutual funds. Many fund managers have poured money into the market as fast as it has come into their funds. So any slowdown in fund purchases could leave managers out of fuel to ignite a new rally.
Still, many Wall Streeters note that the positive fundamentals of the last few years--including low interest rates and merger mania--are likely to keep the market afloat so long as they persist.
Among Monday’s highlights:
* The Dow was lifted by Travelers, which soared $11.31 to $73; American Express, which gained $5.75 to $104.75; and J.P. Morgan, which gained $10.81 to $144.75.
But of the 30 Dow stocks, 20 fell in price on Monday.
* In the banking sector Citicorp led the gains, up $37.63 to $180.50. Citicorp holders will get 2.5 shares of the new Citigroup for each share owned; Travelers shareholders will exchange their shares one-for-one.
Other banks rising included NationsBank, up $1.38 to $75.25; First Chicago NBD, up $2.38 to $92.31; Wells Fargo, up $6.81 to $340.94; Bankers Trust, up $4.50 to $127.25; and Chase Manhattan, up $6.88 to $147.
But BankAmerica fell 81 cents to $86.75.
* Among brokers, Merrill Lynch jumped $10.50 to a record $97, Lehman Bros. rose $6.19 to an all-time high of $80.81, PaineWebber Group rose $2.81 to a record $44.50, and Morgan Stanley Dean Witter rose $4.56 to a high of $80, and Bear Stearns rose $2.38 to $54.88.
* Some semiconductor shares fell after National Semiconductor said it will be able to put all the parts of a personal computer on a single chip by mid-1999, a move that could send PC prices below $400 and challenge Intel’s dominance.
National Semi rose $3.44 to $23.69, while Intel fell $2.88 to $73.88, Texas Instruments lost $1.44 to $54.25 and PC maker Compaq dropped 81 cents to $25.
In commodity trading, silver prices fell 20.5 cents to $6.35 an ounce in New York on rumors that Warren Buffett has sold a substantial part of his silver stake.