Markets Shake Off Compaq Outlook to Hit New Highs
Wall Street scored five home runs Monday as all major market indexes, including the Dow industrials, S&P; 500 and Nasdaq composite, bounced back from an early drubbing to close at new highs.
In its latest demonstration of resilience, the market shook off a stunning earnings warning from Compaq Computer that depressed technology issues and turned it into an excuse for a stock-shopping spree.
The Dow Jones industrial average, down 77 points in early trading, finished with a gain of 165.67 points, or 1.6%, at 10,339.51, its first close above both 10,200 and 10,300. The previous high of 10,197.70 was set Thursday. The index of 30 blue-chip stocks is now up 12.6% this year.
“The bears are saying, ‘I give up,’ and the bulls are saying, ‘I can’t wait anymore; I’ve got to buy,’ ” said Larry Wachtel, market strategist at Prudential Securities.
The Nasdaq composite, despite its heavy weighting in hard-hit computer stocks, rose 5.76 points to 2,598.81. The Standard & Poor’s 500 index closed at 1,358.64, up 10.29 points. Both indexes beat records set Friday.
The composite indexes of the New York Stock Exchange and American Stock Exchange also set records.
Compaq was a trouble spot all day, closing down $6.88, or 22%, at $24.06 as the most active issue on the NYSE. It said after markets closed Friday that it expected earnings would come to 15 cents a share for the first quarter, less than half analysts’ average estimates of 31 cents.
Compaq in part blamed industrywide cuts in personal computer prices, which fed investors’ uneasiness about computer makers’ earnings in general. Dow component IBM fell $2.88 to $183.44, and Dell shed $1.75 to $41.81 in Nasdaq trading.
A number of big Dow stocks were higher, including International Paper, up $2.19 to $46.38, and Caterpillar, up $2.63 to $51.38. Merrill Lynch upgraded its rating for Caterpillar.
The strength in economically sensitive stocks reflects a widening global recovery, said Jack Shaughnessy, market strategist at Advest in Hartford, Conn. Shaughnessy said Western Europe, for example, should benefit from last week’s cut in European interest rates. And, he said, the picture brightens almost daily in Asia and is at least not worsening in Latin America.
Traders also said the broadening of leadership beyond technology shares was a sign that the market could continue to go higher. Technicians--market analysts who examine things such as the ratio of advancing issues to decliners--have been worried since early October that while the Dow and even the Nasdaq and S&P; 500 continue to make new highs, the advances have been confined to too few highflying technology names to be sustainable.
The Russell 2,000 index of small and medium-sized companies advanced 6.46 points, or 1.6%, to 412.32, though it remains down 2.3% for the year.
Advancing issues outnumbered decliners by a 5-4 margin on the NYSE on brisk volume.
The NYSE and American Stock Exchange composite indexes also broke records set Friday. The NYSE composite rose 6.54 points to 633.13, while the American index climbed 7.82 points to 735.32.
Bond yields dipped. The yield on the benchmark 30-year Treasury bond eased to 5.45% from 5.46% on Friday.
Overseas, the Nikkei index in Tokyo fell 2.1% in anticipation of a sell-off on Wall Street. In Europe, stocks were mixed.
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Market Roundup, C13
