End-of-Quarter Push Sends S&P; to New High
The S&P; 500 set another new high and the Dow industrials rose just shy of 9,000 on Monday as a late-quarter push into the most popular blue-chip stocks continued.
Bonds yields rose and the dollar was mixed in quiet holiday week trading.
The Dow rose 52.82 points to 8,997.36, coming within a hair of posting its first close above 9,000 since June 9.
Standard & Poor’s 500-stock index closed at a new high for the third time in four sessions, rising 5.29 points to 1,138.49.
The red-hot Nasdaq composite index rose 21.55 points to 1,891.08 as the technology group extended a powerful two-week rebound.
With the second quarter--and the first half of 1998--coming to a close today, the Dow is up 13.8% for the year, the S&P; 500 is up 17.3% and the Nasdaq composite is up 20.4%.
“There is a general feeling that we can survive this, and that Asia will be major for the Asians but minor for us,” said Alfred Goldman, a market analyst at A.G. Edwards & Sons.
“There is generally a more comfortable feeling about Asia,” Goldman said. “That is bringing a sigh of relief, plus we have end-of-quarter ‘window-dressing’ buying” to spruce up portfolios.
Japanese politicians are drawing up plans to clear up bad loans held by financial institutions in a bid to keep healthy banks afloat when other banks failed. Bad loans are holding back Japan’s economy, analysts said.
As the quarter ends, money managers are ditching weaker stocks and buying stronger names in a last-minute bid to improve the quarterly performance of their portfolios.
Investors are also less nervous about second-quarter earnings, due shortly, now that the profit warnings are mostly out of the way.
“We are through the pre-reporting period and the bad news is behind for this quarter,” said Arthur Hogan, chief market analyst at Jefferies & Co.
President Clinton’s visit to China helped allay fears of any competitive devaluation by China in the face of the struggling Japanese yen, traders said.
There was also little fear on Wall Street that Federal Reserve Board policymakers, due to meet today and Wednesday, will raise interest rates since higher rates could attract more capital away from Asia, worsening the region’s economic problems.
The price of the benchmark 30-year Treasury bond edged down, and its yield, which moves in the opposite direction, rose to 5.64% from Friday’s close of 5.63%.
“The Fed’s hands are more or less tied. You have no inflationary threat and the Asian crisis continues,” said Steven Goldman, market strategist at Weeden & Co. in Greenwich, Conn., referring to worries that higher U.S. rates would exacerbate Asia’s troubles by attracting investment capital away from that region.
Advancing issues outnumbered decliners by a 3-to-2 margin on the New York Stock Exchange, where composite volume totaled 564.05 million shares.
The NYSE composite index rose 2.64 points to 580.17, and the Russell 2,000 index of smaller companies rose 3.56 points to 453.83.
Among Monday’s highlights:
* The Morgan Stanley high-tech index rose for the fourth time in seven days as computer stocks recovered from losses earlier in the second quarter that were by falling prices and slowing demand.
Microsoft rose $2.88 to $107.31, Compaq Computer rose 63 cents to $29.56 and Cisco Systems rose $1.25 to $91.13. Dell Computer, the S&P; 500’s best performer in 1998, gained $2.25 to $94.63.
Software companies gained, including Compuware, up $2.88 to $49.75, and Computer Sciences, up $2.31 to $64.75.
Semiconductor stocks were the exception. Most fell after Intel cut prices on its chips for laptop computers by as much as 37%. Analysts said the world’s largest chip-maker might slash prices further in the next few months, which could jeopardize second-half earnings. Intel dropped 56 cents to $75.81.
* Investors were quick to punish companies that warned of earnings shortfalls. Ikon Office Solutions tumbled $6.75 to $15.31 after the seller of photocopiers, fax machines and other office equipment said earnings for the fiscal third quarter will be “significantly below” the First Call Corp. estimate of 34 cents a share. Ikon didn’t say why.
Cash America International Inc. fell $4.56 to $15.63 after the pawnshop chain said second-quarter earnings will be half the 12 cents a share reported in the year-ago period because of higher costs for a new automated check-cashing machine.
* Paper stocks fell on concern that slowing economies around the world will reduce demand for forest products. While companies are cutting the rate at which they open new paper plants, consumption is falling faster, Merrill Lynch & Co. analyst Sherman Chao said in a report to clients.
He cut his 1998 earnings forecasts on several paper companies and introduced 1999 estimates that are below the Wall Street consensus. International Paper dropped $1 to $42.88 and Union Camp fell 81 cents to $49.38.
Overseas, the Bank of Japan’s tankan survey of 10,000 businesses showed that managers expect conditions to improve by the next survey, in September, as the government spends as much as $117 billion to help pull the economy out of recession.
As a result, Tokyo’s Nikkei-225 stock index gained 1%, while in New York, the dollar fell to 141.69 yen, down from 142.44 on Friday, before the survey.
Market Roundup, D22