Blue Chips Up 127, Buoyed by Good News From GE
Blue-chip stocks rallied on Tuesday, ending a four-session losing streak, as General Electric rescued Wall Street from a series of bleak earnings forecasts.
But the broad market’s gains were limited, as smaller stocks lagged big stocks’ advance.
In other trading, the dollar rose against major currencies after a top Japanese economic official said the recent strength of the yen was hurting his country’s economy.
On Wall Street, the Dow Jones industrials ended up 127.70 points, or 1.5%, at 8,823.30, recouping all of Monday’s 126-point slump.
The Nasdaq composite index, which sank 62 points Monday, ended up 45.68 points, or 2.3%, at 2,012.60, as major tech stocks revived and Internet shares soared.
But in the broader market advancing issues led decliners by a narrow 16-15 margin in active trading on the Big Board.
GE, one of the 30 Dow stocks, buoyed sentiment in the blue-chip market by projecting solid earnings growth in 1999. The stock surged $6.31 to $93.13.
GE’s announcement was an important psychological boost for Wall Street, which has been hurt in recent sessions by warnings of profit shortfalls at such giant companies as Merck, Coca-Cola and J.P. Morgan.
“There’s just been so much negative sentiment out there lately, people tend to exaggerate the impact of any good news,” said Conley Turner, an analyst at Wall Street Strategies.
Stocks also were hammered Monday by fears that President Clinton’s impeachment in the U.S. House is a foregone conclusion, forcing a Senate trial.
On Tuesday, however, buyers returned--at least to blue chips.
Smaller stocks were laggards. The Standard & Poor’s SmallCap stock index gained just 0.3% to 161.67. Winners had only a narrow margin over losers on Nasdaq.
Analysts said that, despite GE’s announcement, many U.S. companies are facing difficulty boosting earnings in the near term because of overseas sales weakness, rising domestic labor costs and a lack of pricing power.
Indeed, while GE was upbeat, Eastman Chemical on Tuesday plunged $10.69 to $46.19 after warning that current-quarter results will be just 10 to 15 cents a share, far below the 82 cents expected. And heavy-machinery maker Caterpillar sank $1.81 to $44.44 after saying current-quarter earnings will 13% or more below analysts’ expectations.
In the bond market, Treasury yields continued to seesaw, rising modestly as some money flowed back to stocks. The 30-year Treasury bond yield edged up to 5.03% from 4.99% on Monday.
The dollar was a winner, rising 0.86 yen to 116.35 yen in New York, after Taichi Sakaiya, chief of Japan’s Economic Planning Agency, warned that an “unexpectedly strong” yen will hurt Japan’s recovery.
The yen has strengthened sharply in recent weeks. Still there is no sign that the Japanese or U.S. governments are about to intervene in currency markets.
Overseas, Japan’s main share index fell 0.7%, but Brazilian shares rebounded, gaining 5.3%.
Among Tuesday’s highlights:
* Big-name stocks rising sharply included Hewlett-Packard, up $2.38 to $65.88; American Express, up $3.25 to $94.75; and Intel, up $4.38 to $115.94.
Also, Citigroup soared $2.69 to $48.75 after announcing major layoffs to cut costs.
* Multinational consumer stocks rebounded from their recent drubbing on earnings concerns. Procter & Gamble gained $2.88 to $89.50, Avon rose $1.81 to $39.19 and Gillette surged $1.88 to $43.31.
* Best Buy’s strong earnings report helped buoy the retail sector. Best Buy surged $4.13 to $53.13, Wal-Mart gained $2 to $76.81 and Circuit City jumped $3.19 to $43.50.
* The Internet sector came alive once again, with Amazon.com soaring $20.50 to a record $242.75, Yahoo up $6.75 to $198, Infoseek up $6.31 to $47.50 and Go2Net up $3.19 to $33.
Also, Infospace.com made its debut, rising from its initial offering price of $15 to close at $20. It provides content for 900 Web sites.
* General Instrument leaped $3.69 to $34.25 on rumors it is in takeover talks.
In commodity trading, coffee prices hit a six-month high in New York as worldwide weather problems cut U.S. supplies.
Market Roundup, C11
