Blue Chips Gain on Profit News; Dow Jumps 102
Robust quarterly earnings reports from companies such as Walt Disney and Ford Motor helped bolster confidence on Wall Street on Tuesday, sparking a rally in blue chips.
But in the bond market, yields rose after the government reported a jump in labor costs in the fourth quarter, raising questions about inflation pressures.
On Wall Street, the Dow Jones industrial average jumped 102.14 points, or 1.3%, to 7,815.08, as winners outnumbered losers by 17 to 12 on the New York Stock Exchange.
The blue-chip Standard & Poor’s 500 index rose 1.3% as well, to 969.02. It is just 1.5% below its record high set in early December.
The advance halted a four-session losing streak that began after the latest allegations of sexual impropriety against President Clinton surfaced last week.
But on Tuesday, with Clinton’s grip on power appearing somewhat firmer after his heated denial of the allegations on Monday, Wall Street was ready to rally.
Sentiment was boosted by Disney’s strong earnings and by Ford’s report, traders said.
“The good earnings reports, especially by Disney, gave people hope, but the market was just looking for a reason to bounce up,” said Bob Dickey, managing director of technical analysis at Dain Rauscher in Minneapolis.
The broad market wasn’t as strong as the blue chips. Winners barely edged losers on Nasdaq, although the Nasdaq composite index gained 1.1% thanks to strength in big-name tech stocks.
About 233 companies in the S&P; 500 have reported earnings for the quarter ended Dec. 31. Of them, 47% have topped estimates, 31% fell short of forecasts and the rest were in line.
At this point last quarter, about 57% of the companies had beaten expectations.
Slowing earnings growth has been a major concern for Wall Street in the new year. Still, with just three sessions left in January--a month that has frequently foretold the market’s fortunes for the entire year--the Dow is down only 1.2% since year’s end.
If the market can close out January above its December close, that would be a bullish signal by historical standards.
The bond market is threatening to get in the way, however: Yields rose Tuesday after the government said labor and benefit costs increased 1% in the fourth quarter, the fastest pace in five years.
Labor costs are a key indicator in the Federal Reserve Board’s deliberations about interest rates. Fast-rising labor expenses could provoke the Fed to tighten credit.
The yield on the bellwether 30-year Treasury bond rose to 5.94% from 5.89% on Monday. The yield on three-month T-bills rose to 5.25% from 5.21% on Monday.
“The bond market is telling us pretty strongly what it believes--that the threat of inflation” is still present, said Jay Mueller, who helps manage about $22 billion in bonds for Strong Capital Management in Menomonee Falls, Wis.
But higher yields didn’t help the dollar, which resumed its decline Tuesday against the German mark and Japanese yen.
“Bouts of concern about the presidential situation have a negative impact on the dollar,” said Dennis Pettit, trader at Long Term Credit Bank of Japan in New York.
The dollar fell 1.53 yen to 125.32 in New York.
Among Tuesday’s highlights:
* Stocks responding to earnings reports included Disney, up $5.38 to $102.75; Ford, up $1.63 to $49.88; Procter & Gamble, up $2.38 to $80.88; American Home Products, up $2.06 to $92.56; and Schering-Plough, up $1.75 to $73.25.
* In the tech sector, Intel and Microsoft continued to rebound. Intel rose $1.50 to $79.19, its highest since Dec. 1. Microsoft gained $3.44 to $145.19. It announced a 2-for-1 stock split Monday.
Other tech winners included Dell, up $2.88 to $97.50, and Sun Microsystems, up $1.81 to $46.94.
* Black & Decker surged $4.50 to $47.31 after it said it will cut 10% of its work force.
* Philip Services plunged $4.88 to $8.25 amid concern that a big miscalculation in the scrap processor’s copper inventory may mean that the company doesn’t have a handle on its business.
In foreign trading, most European and Latin American markets were up sharply, as was Hong Kong, where the Hang Seng index gained 3.1% to 9,252. But Tokyo stocks eased slightly after their recent rally.
