Dow Rises to New High; Broad Market Struggles
The blue-chip Dow Jones industrial average reached a new high on Monday, but the broad market faced tougher going, as lofty stock valuations re-emerged as a key concern.
The Dow rose 45.59 points to a record 9,192.66, barely topping the previous peak of 9,184.94 set on April 21.
But the Dow gave back much of its early gain on Monday: It had been up as much as 115 points.
Some broader indexes flirted with new highs in the morning, but the advance quickly deteriorated into a blue-chip affair, resuming what analysts called a worrisome trend.
By the close, winners topped losers by just 1,567 to 1,454 on the New York Stock Exchange. Trading was relatively subdued.
“Money managers are aware of the lofty levels of the market [relative to earnings], and most want to be more selective about their purchases and wait for pullbacks,” said Dan Ascani, president of Global Market Strategists of Gainesville, Ga.
“The rally is becoming narrower day by day--even the S&P; 500 is lagging the Dow. That’s typically a sign of a very mature bull phase. We’re expecting a peak fairly soon.”
The S&P; index added 1.07 points to 1,122.07, holding below its recent peak of 1,130.54.
The Nasdaq composite index rose 5.42 points to 1,878.86. Its recent peak was 1,917.61.
Stocks opened the day strong amid continued optimism from late last week, when a timely stream of data reinforced the bull market’s long-running theme of steady economic growth without inflation.
That data quickly overshadowed last Monday’s reports that the Federal Reserve might boost interest rates to slow the economy.
Among the major economic reports due this week, Friday’s reading on April payroll and wage levels--two key forces behind inflation--is the most critical.
The bond market was fairly calm on Monday, as investors await the employment data. The yield on the benchmark 30-year Treasury bond was unchanged at 5.93%.
Among Monday’s highlights:
* Union Carbide surged $3.31 to $51.50 to lead the Dow’s advance after a British newspaper reported that the chemical maker had spurned a merger bid from British Petroleum.
The Dow also drew a boost from Eastman Kodak, up $2.81 to $76.19, and 3M, up $1.88 to $96.69.
“Even among the big stocks, the buying is getting narrower,” said Larry Rice, chief investment officer at Josephthal & Co. “Going back a few weeks, it seems that the Dow is being buffeted by only a few stocks a day. That tells me that we’re in the very late phases of rally here.”
* Another Dow stock, Walt Disney, rose $1.44 to $127.13 as the entertainment and media company’s “He Got Game” movie took the top spot at the box office on its first weekend, with estimated ticket sales in the U.S. and Canada of $8.1 million, giving the studio a much-needed boost.
* Many Internet-related stocks rallied again, helped by sharp gains in America Online, whose chief financial officer was quoted in Barron’s magazine as saying that the stock is worth almost $150 a share. America Online closed up $5.50 at $89.
Internet directory Yahoo Inc. rose $2.25 to $120.88 as the company introduced Yahoo Chinese, its Chinese-language Internet guide, enabling it to reach Chinese speakers worldwide.
K-Tel International, which recently announced plans to sell its recorded music over the Internet, rocketed $19.75 to $67.75 as buyers again herded into the stock.
* Some biotech shares soared with EntreMed, which zoomed $39.50 to $51.81 on optimism about its anti-cancer drugs. (Story, D1.) Among other biotech names, Immunex jumped $5.13 to $73.13, Sugen gained $2.81 to $16.44 and Repligen leaped $1.53 to $3.
* Bank stocks were broadly lower, included Wells Fargo, which sank $7.75 to $379.50 after soaring last week on renewed takeover talk.
In commodity trading, oil prices drifted lower amid reports that the oil ministers of Saudi Arabia, Venezuela and Mexico would probably meet this week to explore new ways to buoy sagging oil prices.
At the New York Merc, crude oil for June delivery closed 18 cents lower at $15.95 a barrel.
Many energy-related shares pulled back, including Exxon, down 88 cents to $74.75; Transocean Offshore, down $2.50 to $56.81; and Halliburton, down $1.13 to $55.88.
In foreign trading, while most European stock markets surged, South Korea’s market fell 3.6% on labor-unrest fears.
