Dow Closes Above 8,300 for First Time
The Dow Jones industrial average overcame mild profit-taking Wednesday to eke out a moderate gain and notch its second straight record high after a six-month drought.
The Dow never strayed more than 20 points in either direction, finally drifting up at day’s end to finish at 8,314.55, a gain of just 18.94 points, but enough for its first close above 8,300.
The day’s big news came when El Segundo-based Computer Sciences jumped $11.69 to $103.88 after Computer Associates International made public a $9-billion bid for the company. The Islandia, N.Y.-based company revealed its $108-a-share bid after two months of merger talks between the two companies broke down. Computer Associates fell $7.31 to $50.75.
The broad market was mixed, with advancing issues outnumbering decliners by a small margin and several leading indexes edging to new highs after meandering through the sleepy session. The Standard & Poor’s 500 and the New York Stock Exchange composite index closed at record highs for the sixth time in eight sessions.
Analysts said it was encouraging that investors have refrained from locking in hefty profits from the last three weeks, a sign that people are less worried about a sudden downdraft than about the risk of missing out on new gains.
“After such an enthusiastic, unexpected rally [Tuesday], for the market to stabilize is a good sign,” said Robert Stovall, head of Stovall/Twenty-First Advisers. “It bodes well for a resumption of the rally” today.
Intel dipped $1.19 to $85.06 to lead a decline in semiconductor shares after an influential analyst predicted that chip profits will be disappointing this year.
“If investors don’t want to lose money in the next six months, they should sell,” Merrill Lynch & Co.’s Thomas Kurlak said. “The recent rally is not sustainable. Demand is slowing.”
Kurlak, whose opinions often move the market, told investors that an expected earnings recovery for chip makers isn’t likely to materialize. The stocks are likely to decline, he said, because of slowing worldwide sales growth and too much capacity.
Kurlak said his comments applied strictly to semiconductor companies, but added: “If my industry is weak globally, something is happening. The end markets [computer makers] must be slowing down.”
The Dow, which rose 115.09 points Tuesday to 8,295.61 to beat its Aug. 6 record of 8,259.31, is now up more than 5% for the new year despite sliding to a 4% loss in the first six sessions of January.
Major indexes were lower for much of the day Wednesday. But falling yields in the bond market helped stocks recover as bonds posted their best performance in almost two weeks. Expectations for scant inflation and shrinking government borrowing boosted demand at a sale of Treasury notes. The yield on the benchmark 30-year Treasury bond fell to 5.84% from 5.92% Tuesday.
Advancing issues outnumbered decliners by a 9-8 margin on the NYSE, where volume totaled 599.3 million shares, down from Tuesday’s tally of 647.7 million.
The S&P; 500 rose 1 point to 1,020.01, and the NYSE composite rose 0.79 point to 530.75.
With no major developments on the economic or political front, corporate merger activity dominated the spotlight. Computer Associates was the third-most-active issue, Computer Sciences seventh.
In another deal, Illinois Central rose $2.69 to $38.38 after the late Tuesday announcement that Canadian National Railway agreed to buy the Chicago-based railroad for $39 a share in a $2.4-billion deal.
On other exchanges, the Nasdaq composite index, which on Tuesday closed above 1,700 for the first time since just before the Asia-induced sell-off in late October, slipped 0.49 point to 1,708.55. The Russell 2,000 index of smaller companies rose 0.83 point to 452.02, but the small-company dominated American Stock Exchange composite index fell 1.71 points to 684.33.
Overseas, Indonesia’s benchmark stock index posted its biggest one-day decline in five weeks on concern that controls on investor capital will accompany plans to peg the rupiah to another currency. The Jakarta Stock Exchange Composite Index tumbled 5.8%.
Frankfurt’s DAX rose 1.4% and London’s FTSE-100 slipped 0.1%. Japanese markets were closed for a holiday.
The dollar rose to 123.48 yen from 123.19 as traders scaled back expectations that Japan’s government will soon spend more to revive the domestic economy.
Silver fell for the third time in four days as traders sold it at prices close to 9 1/2-year highs. Silver for March delivery fell 10.2 cents, or 1.4%, to nearly $7 an ounce on the New York Mercantile Exchange.
Among Wednesday’s highlights:
* Two leading technology names stepped forward late Tuesday with better-than-expected results: America Online rose $5.50 to an all-time high of $114.50 in active NYSE trading. But Applied Materials slipped 6 cents to $35.94 as the most active Nasdaq issue after cautioning that Asia’s economic crisis is hurting orders for its chip-making equipment.
* The Dow’s biggest gainers were Walt Disney, up $2.31 to $110.81; 3M, up $1.88 to $87.88; and IBM, up $1.81 to $102.69.
* Earthlink Network, jumping as much as $11.38, closed up $8.13 to $46.75, a day after the Internet services provider agreed to combine its Internet access business with Sprint’s.
* MTL surged $9.75 to $38.75 after investor Leon Black’s Apollo Management agreed to buy the transportation firm for about $250 million in cash, options and assumed debt.
