Blue Chips Fall; Nasdaq Rises to New High
Blue-chip stocks fell but bond prices rose Monday as Wall Street awaited Federal Reserve Board Chairman Alan Greenspan’s two-day congressional testimony starting today.
The dollar edged higher against the German mark as some traders speculated that a major international aid package for Russia would only stem, not end, Moscow’s liquidity problems.
The Dow Jones industrial average ended 42.22 points lower at 9,295.75 following Friday’s record close.
Most broad-market indexes also pulled back following Friday’s record-setting advance, but the Nasdaq composite rose 5.49 points to a record 2,104.25, extending this year’s robust gain to 28.3%.
“I think we’re on hold for a couple of reasons,” said Hugh Johnson, chief investment officer at First Albany. “People are waiting to see what kind of earnings IBM is going to report and also waiting for Greenspan’s talk [Tuesday].”
IBM reported after the close that it earned $1.50 per diluted share in the second quarter, beating Wall Street expectations by a penny. In the same quarter last year, IBM earned $1.43.
Louis Gerstner, IBM’s chief executive, said the results were hurt by price competition in personal computers, excess inventory and the fallout from Asia’s crisis. But he saw good momentum in growth businesses going forward.
IBM closed up $1.56 at $121.75 on the Big Board.
Greenspan will present his semi-annual Humphrey-Hawkins testimony on the economy and financial markets before Congress today and Wednesday.
“I don’t think we will see any surprises . . . in Greenspan’s testimony,” said Alan Skrainka, chief market strategist at Edward Jones. “He’s looking pretty smart after all; he felt inflation was under control and the economy would slow, and he has been dead on.”
Some pullback was seen as inevitable after Friday’s gains.
“It’s a case where a lot of the strong stocks have gotten extended and they are due for a correction,” said Frank Gretz, a market analyst at Shields & Co.
Declining issues outnumbered advancers by a 7-5 margin on the New York Stock Exchange in heavy trading, but down from Friday’s brisk pace.
The Standard & Poor’s 500 index fell 2.65 points to 1,184.10, and the NYSE composite index fell 1.54 points to 599.21. Both measures closed at record highs Thursday and Friday. The Russell 2,000 index of smaller companies fell 0.44 points to 461.92.
Supportive comments from one of Wall Street’s biggest bulls appeared to have little effect as the market focused on specific company news and earnings.
Goldman Sachs & Co.’s market strategist Abby Joseph Cohen rolled out her 12-month outlook on the market by introducing a target of 1,250 points on the Standard & Poor’s 500 index for mid-1999, up from a spring target of 1,200.
Cohen, the co-head of Goldman’s investment policy committee, updated her rolling 12-month projection for the S&P; to reflect continued gains in stocks. She said second-quarter earnings reports are “so far, so good.”
She didn’t give a new prediction for the Dow, as the heaviest period of earnings reports is coming this week. “It’s still too early in the reporting period to draw any meaningful conclusions,” she wrote to clients.
“Our targets for the market indices will be reviewed when another big chunk of fundamental information becomes available,” she said. “This will include second-quarter reports, prospects for the global economy, inflation and interest rates.”
In the bond market, the price of the key 30-year U.S. Treasury bond rose half a point. The yield, which moves in the opposite direction, fell to 5.71% from 5.74% at Friday’s close. Among Monday’s highlights:
* Tempering the losses, Lucent Technologies soared $7.38 to $102.25, stretching its 1998 gains to 155%. Investors are betting that the communications systems and software company will top the 27-cent-a-share estimate by Wall Street analysts when it reports earnings today.
Lucent rival Cisco Systems rose $3.44 to $103.19.
Market Roundup, D14
