Dow at Record as Yields Dip; Market Mixed

Another small decline in bond yields on benign economic news helped push the Dow industrials to a new high Wednesday, but the broad market was mixed.

The Dow gained 50.07 points, or 0.6%, to a record 9,211.84, eclipsing the previous closing peak of 9,192.66 set May 4.

But no other major index joined the blue-chip Dow at new heights. The Nasdaq composite added 6.02 points, or 0.3%, to 1,866.18, but remains 2.7% below its recent peak of 1,917.61.

The Standard & Poor’s 500 was up 3.07 points, or 0.3%, to 1,118.86, still trailing its peak closing value of 1,130.54.

Falling stocks outnumbered rising issues by 1,548 to 1,436 on the New York Stock Exchange and by 2,191 to 1,986 on Nasdaq. Even so, that represented a marked improvement in the market’s breadth from recent sessions.

Nonetheless, “there is less [to the Dow’s new high] than meets the eye,” said Hugh Johnson, investment chief at First Albany Corp.

In the bond market, yields fell across the board, with the 30-year Treasury bond yield--a benchmark for other long-term rates, including mortgage rates--dipping to 5.94% from 5.97% on Tuesday.

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Bonds’ rally was inspired in part by news that inflation remained caged last month: Wholesale prices rose just 0.2% in April. And a separate report on U.S. retail sales showed that spending was stronger in April than in March, but not by an amount that would suggest gangbusters economic growth.

Both reports--along with renewed turmoil in East Asia--suggest that the Federal Reserve Board will leave short-term interest rates unchanged when it meets Tuesday.

“The numbers mean a steady Fed going forward,” said Kevin Kennedy, who helps manage $17 billion of assets at Citibank Global Asset Management.

The U.S. bond market was also helped Wednesday by “safe haven” investing on the part of global investors seeking refuge from Asia’s latest troubles--and perhaps from the political fallout generated by India’s second round of nuclear bomb tests.

In East Asia, stock markets and currencies slumped Wednesday as Indonesia’s civil strife worsened. The Indonesian rupiah plunged to 11,500 to the dollar from 9,850 on Tuesday.

The U.S. Treasury, selling new 10-year notes on Wednesday, got a warm reception: The notes yielded 5.646%, below expectations.

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For the stock market, the key now is whether the broad market can begin to rally, joining blue chips at new highs. Without such a broadening of interest, many analysts say, the Dow’s gains aren’t likely to continue.

Still, many pros say, there is nothing on the horizon today to suggest that U.S. investors will begin moving out of stocks in a meaningful way.

“It’s a bull market until proven otherwise,” said Geoffrey Brod, a money manager at Aeltus Investment Management Inc., which oversees $45 billion.

Among Wednesday’s highlights:

* Many big-name tech issue were strong, but that group may be tested today, in the wake of Hewlett-Packard’s surprise announcement late Wednesday that earnings in its quarter ended April 30 will be about 65 cents a share--well below the 78 cents expected.

HP shares had risen $1.75 to a record $81.63 before the announcement. Other gainers included IBM, up $2.25 to $121.88; Microsoft, up $1.25 to $86.94; and Dell, up $3.88 to $98.25.

* Also in the tech sector, Motorola rocketed $3.50 to $59.38 in heavy trading on speculation that Germany’s Siemens group was considering buying the company. Siemens said it isn’t interested.

* Retail stocks continued to lead the market, as many large retailers are reporting robust earnings for their first fiscal quarter. May Department Stores gained $1.13 to $65.50, Mercantile Stores rose $1.13 to $74.50, Dayton Hudson leaped $1.06 to $45.06 and Wal-Mart jumped $1.38 to a record $54.13.

But Bed Bath & Beyond dropped $2.31 to $51.94 after the home furnishings retailer said family trusts owned by Warren Eisenberg and Leonard Feinstein, co-chief executives of the company, sold 2 million shares.

* Auto stocks soared on renewed speculation that Daimler-Benz’s planned $41.5-billion acquisition of Chrysler will accelerate an industry shakeout that’s already under way. GM surged $1.94 to $75.06 and Ford leaped $2.44 to $48.19.

Ford denied an Italian newspaper report that it was interested in acquiring Fiat. Fiat’s U.S.-traded shares rose 56 cents to $23.13.

* Airline stocks rose as oil prices fell to their lowest levels since March, as the worldwide oil glut continues. That could mean lower fuel prices for airlines. AMR, parent of American Airlines, jumped $1.94 to $150.31, while US Airways gained $2.31 to $67.69.

* On the downside, Baby Bell stocks sank as investors pulled away despite this week’s announcement of SBC Communications’ plan to buy Ameritech. SBC fell $1.38 to $38.06 and Ameritech lost $2.13 to $43.50. Other losers included US West Communications, down 69 cents to $49.75, and Bell Atlantic, down $1.69 to $92.19.

* Also in the telecom arena, computer networker Bay Networks surged $3.94 to $27.94 on a report that it rejected a takeover offer from Canada’s Northern Telecom. NorTel fell $1.25 at $63.56.

* In the latest example of Internet mania, Wilmington, N.C.-based C-Phone rocketed $6.94, or 247%, to $9.75 as the maker of picture phone systems introduced its C-Phone ITV, a television set-top device that provides Internet access using a TV and a regular analog phone line.

Other Internet-related stocks also gained, including Yahoo, up $8.31 to $124, and America Online, up $2.25 to $90.

* In the biotech field, Cephalon slumped $3.38 to $11.38 as analysts said the drug company’s Myotrophin drug for Lou Gehrig’s disease may not win final U.S. regulatory approval.

Market Roundup, D8