Profits, Asia Optimism Send Dow Up 149
The Dow Jones industrials on Tuesday finally topped their spring high, soaring 149.33 points, or 1.6%, to 9,245.54, fueled by some strong earnings reports and hopes for economic recovery in Asia.
But the broad market was substantially weaker, with most small-stock indexes barely advancing.
Meanwhile, bond yields continued to edge up despite favorable inflation news, and the dollar fell.
The Dow’s gain lifted it past the previous record close of 9,211.84 set May 13.
The 30-stock Dow, the best-recognized U.S. blue-chip index, thus joined the broader blue-chip index of the Standard & Poor’s 500 at a new high. The S&P; has advanced faster than the Dow this year, and gained another 1.1% on Tuesday, to a record 1,177.58.
With big-name issues such as Johnson & Johnson, Fannie Mae and J.P. Morgan reporting healthy second-quarter earnings Tuesday, “tried-and-true companies are proving themselves once again,” said Ned Riley, chief investment officer at BankBoston Corp., which oversees $30 billion.
“Earnings in general have come in ahead of reduced expectations,” said Joseph DeMarco, managing director of equity trading at HSBC Asset Management, which oversees $50 billion. “We’re in the midst of a summer rally.”
Wall Street also is hoping that Japan’s new leader, who will replace Prime Minister Ryutaro Hashimoto in the wake of the ruling party’s severe electoral setback Sunday, will redouble efforts to put the recession-hit economy back on an even keel. A successor has not yet been named.
Asian stock markets were mixed Tuesday after tumbling Monday. But early today the region’s markets were rallying strongly. Hong Kong’s key index, up 1% on Tuesday, was up 3.4% early today.
In Tokyo, the Nikkei-225 index, which rose 0.8% on Tuesday, was off modestly early today.
The dollar lost ground in New York on Tuesday against the yen, falling 1.4 yen to about 140.
The dollar hurt the bond market, where yields rose for a third consecutive session. The 30-year Treasury bond yield ended at 5.72%, up from 5.69% on Monday.
With rising hopes for an economic recovery in Japan, some investors who sought “safe haven” in bonds now may be cashing out, traders said.
The bond market seemed unimpressed by the consumer inflation report for June, which showed prices overall up a mere 0.1%.
On Wall Street, the Dow’s big gain overshadowed a weak session in the broader market. Winners barely topped losers in the Nasdaq market, home to most smaller stocks. The Russell 2,000 index of smaller issues rose just 0.2%, as investors continued to flock to big-name stocks at the expense of smaller shares.
Among Tuesday’s highlights:
* Bank stocks were hot as several companies posted strong earnings reports. J.P. Morgan--one of the Dow stocks--surged $7.56 to $133.56, the equivalent of 30 Dow points, on its better-than-expected report.
Other gainers included First Union, up $1.81 to $64.81, and Norwest, up $1.25 to $39.38.
* Johnson & Johnson surged $2.44 to $74.25 on its earnings report, and that helped boost other drug stocks. Warner Lambert gained $3.06 to $78.75; Merck rose $2.50 to $137.38. Both Warner and Merck won expanded Food and Drug Administration approval for their cholesterol-lowering drugs.
* Some oil stocks gained as crude prices rebounded, with August futures rising 64 cents to $14.55 a barrel. Exxon advanced $1.56 to 72.06, Mobil added $2.50 to $75.38 and Atlantic Richfield jumped $3.25 to $73.69.
* The Dow also drew a boost from cyclical issues considered most dependent on global economic trends: Caterpillar rocketed $4.13 to $56.25 and Alcoa was up $3.25 to $68.63.
* Tech stocks, recently red-hot, were mixed. Intel fell $1.69 to $80.69 ahead of its profit report, which came in below expectations. Microsoft lost $1.06 to $116.50 and Apple was off 50 cents to $33.44.
* Internet mania enveloped another company that announced plans to sell on the Internet. Itex soared $4.50 to $6.06 after the nation’s largest barter-exchange company introduced its so-called Online Trading Center.
In foreign trading London surged 2.4%, helped by the Dow’s early gains.
Market Roundup, D9