Dow Hits 8,451; State Bond Sale Nears $1 Billion
Blue-chip stocks rose to their sixth record high in a row, pushing the Dow Jones industrial average to its first close above 8,400, as investors bought shares of technology, drug and other companies whose earnings they expect to grow even if the economy slows.
Bonds fell amid selling by hedge funds, and the dollar slid after a report showing a sharp fall in U.S. wholesale prices.
The Dow climbed 52.56 points to 8,451.06, continuing a trend of small-to-modest gains that has added just 155 points to the blue-chip barometer in five sessions. Even so, the Dow is now up nearly 7% for the new year, despite a 4% plunge during the first six trading days of 1998.
The broader market also set new highs, with the Standard & Poor’s index of 500 stocks up 9.30 points at 1,032.06, the eighth record close in 12 sessions. Advancing issues led declines 7-5 on active volume of 604 million shares on the New York Stock Exchange.
The Nasdaq composite index, which is heavily weighted with technology stocks, rose 12.30 points to 1,715.73, still under its record close of 1,745.85.
“It’s very painful to own cash and watch the market rally at this rate,” said Alan Skrainka, chief market strategist at Edward Jones.
Analysts said there was no news out Wednesday to shake Wall Street’s bullish frame of mind.
“We remain in a low-interest-rate, low-inflation, moderate-growth environment and should continue upward,” said Tony Dwyer, chief market strategist at Ladenberg Thalmann.
The government on Wednesday said a sharp drop in energy prices sliced a surprisingly high 0.7% off producer prices in January.
The core rate of the producer price index, excluding volatile food and energy components, fell by 0.1%. Economists had expected a 0.2% drop overall and a flat core rate.
The positive inflation news, however, failed to inspire the bond market, which gave up early gains to hedge-fund selling, traders said.
The 30-year Treasury bond fell, and the yield rose to 5.83% from 5.79% on Tuesday.
Meanwhile, municipal bonds fell as California led issuers with a $990-million sale of general obligation bonds that moved quickly into investors’ hands.
BancAmerica Robertson Stephens won the California bonds in a competitive auction and reserved the bulk of the sale for buyers it already had lined up. Of the 25 maturities in the $990-million refunding sale, only nine were made available to other investors.
The sale closed with no bonds remaining, said BancAmerica’s Peck Ferrin.
The new California bonds were given yields ranging to 5.04% for bonds maturing in 2020. The yields were 4.70% in 2012, only .05 percentage point more than triple-A rated general obligation bonds.
Yields close to the triple-A scale didn’t surprise some investors.
“People are certainly viewing California a lot more optimistically than they were just a couple of years ago,” Ferrin said.
The last time California sold general obligation debt was in October, when it sold $1 billion. Those bonds were given 15-year yields at 5.05%, or .11 percentage point more than triple-A rated state general obligation bonds at that time.
The sale “shows Wall Street has solid confidence in California’s future,” state Treasurer Matt Fong said in a statement after the sale. He said the refunding was the state’s largest ever and saved about $92 million in borrowing costs.
Among Wednesday’s highlights:
* Technology shares helped lead Wednesday’s advance, despite late Tuesday’s report from Hewlett-Packard, which came in slightly shy of forecasts and included cautionary comments about Asia. HP rose $1.50 to $63.13 to help lead the Dow, whose most prominent advancers were drug and oil shares: Merck rose $4.38 to $124.25; Chevron rose $1.94 to $78.75; and Exxon rose $1.69 to $63.81.
* Steelcase surged $5.63 to $33.63 in its first day of trading. The maker of office furniture sold 12.15 million Class A shares at $28 in a $340.2-million initial public offering.
At the New York Mercantile Exchange, crude oil for March delivery closed 59 cents higher, at $16.25 a barrel. Earlier in the day, the price fell to a life-of-contract low at $15.45, the lowest price for crude since April 1994.
Overseas, Tokyo’s Nikkei stock average fell 1.1%; Frankfurt’s DAX index rose 0.6%; and London’s FTSE-100 rose 0.2% to a new high.
Market Roundup, D8
