AT&T-TCI; Deal Fuels Broad Rally
Wall Street’s rebound got a power boost Wednesday from the surprise merger announcement of AT&T; and Tele-Communications Inc., and the broad market closed sharply higher.
Meanwhile, the dollar continued its fresh ascent against the Japanese yen.
The blue-chip Standard & Poor’s 500 index set its first new high in two months, gaining 13.39 points, or 1.2%, to a record 1,132.88.
That eclipsed the previous closing high of 1,130.54 set April 22, and pushed the index’s year-to-date gain to 16.7%.
After an early slide, the Dow Jones industrials shot up 95.41 points, or 1.1%, to 8,923.87--and would have been higher except for the 8.2% drop in component stock AT&T.;
The Dow still is below its record high of 9,211.84 set May 13.
As in recent sessions, the tech-heavy Nasdaq composite index bettered the blue-chip indexes. The Nasdaq surged 33.19 points, or 1.8%, to 1,877.76, nearing its record close of 1,917.61 reached April 22.
Smaller stocks, which have suffered worst in the market’s pullback of recent weeks, turned in a respectable performance. The Russell 2,000 index of smaller issues gained 0.9% to 451.31.
“The hot money is running after the tech stocks and some of the blue chips because the feeling is among portfolio managers that we have seen the low end of trading ranges,” said Michael Metz, managing director of CIBC Oppenheimer & Co. “They want to be where the action is.”
Shaking off worries about second-quarter earnings and Asia’s woes, many fund managers are loading up on favorite stocks ahead of the end of the quarter.
What’s more, “the fact that you have mergers and acquisitions says something about valuations: They must not be too high if you can still do deals like this,” said Robert Froehlich, chief investment strategist for Kemper Funds in Chicago.
In the broad market, winners topped losers by 17 to 13 on the New York Stock Exchange and by 22 to 19 on Nasdaq. Trading was very heavy.
The market all but ignored the dollar’s renewed vigor. The greenback soared to its highest level against the yen since Japan and the United States intervened in currency markets last week.
In New York the dollar rose to 141.25 yen from 139.15 on Tuesday. It also rose slightly against the German mark.
But Asian stock markets were fairly calm Wednesday, despite the dollar’s gains. Tokyo shares rose 0.5%; Hong Kong gained 0.9%.
In the U.S. bond market, yields ended mixed. The 30-year Treasury bond yield inched up to 5.66% from 5.64% on Tuesday.
The Treasury also sold new five-year notes at a yield of 5.454%, slightly higher than expected.
Among Wednesday’s highlights:
* Some of the day’s biggest gainers were cable TV stocks and telecommunications equipment makers, reacting to the AT&T-TCI; deal. Cablevision Systems, for example, rose $14 to $76. Equipment supplier Lucent Technologies jumped $1.63 to a record $80.13 and Broadcom surged $7.63 to $66.13.
* Leading the Nasdaq advance once again were Microsoft, up $4.19 to a record $104.94, and Intel, up $2.13 to $77.38.
* Bank stocks were also strong, led by Citicorp, up $5.44 to $154.56, and Chase Manhattan, up $2.94 to $73.13. Banks benefited from investors’ search for large stocks with healthy earnings prospects, traders said.
* AT&T;’s slide in the Dow was easily offset by big gains in favorites such as Merck, up $3.94 to $131.25; Disney, up $2.94 to $112.69; and Procter & Gamble, up $2.63 to $90.88.
In commodity trading, cotton prices rose to their highest level in two years as concerns grew that crop damage in Texas and California will sharply reduce supplies.
At the New York Cotton Exchange, cotton for July delivery ended 0.88 cent a pound higher at 80.60 cents, the highest closing price since June 1996.
Prices have risen 30% since April 7 as concerns began building about the effects of hot, dry weather in Texas, the No. 1 cotton-producing state, and rainstorms in California, the No. 2 cotton state.
*
Market Roundup, D9
