Heavy-Industry Shares Lead Rally
Rust Belt stocks regained a bit of luster Tuesday as some investors bet on an improving global economic outlook.
Wall Street overall closed higher, even though most major stock indexes posted modest losses.
The Dow Jones industrial average gained 55.50 points, or 0.5%, to a record 10,395.01, lifted by heavy-industry issues.
The Russell 2,000 index of smaller stocks also had a good day, rising 1.2%.
Profit-taking in major tech stocks, meanwhile, weighed on both the Standard & Poor’s 500 index and the Nasdaq composite.
The Nasdaq index slipped 0.6%. Heavy trading in tech shares and many Internet-related names boosted Nasdaq trading volume to the second-heaviest ever, at 1.3 billion shares.
“This is a continuation of the last week or so’s trend of market rotation out of tech stocks and into other sectors,” said Charles Crane, chief market strategist at Key Asset Management in New York.
Investors were still unsettled by Compaq Computer’s warning late Friday of a disappointing earnings report. Compaq, which fell nearly $7 on Monday, eased another 19 cents to $23.88.
Traders were anxiously awaiting computer chip giant Intel’s earnings, which were released after the market closed Tuesday. Intel shares fell 75 cents to $60.50 in advance of the report, which turned out to be better than analysts had estimated.
In the market overall, winners topped losers by 21 to 19 on Nasdaq and by a slim margin on the New York Stock Exchange.
The surprise rally in “cyclical” industrial stocks reflects two things, analysts said: a search by institutional investors for stocks that may be better values than many tech shares and a belief that the global economy may fare better than expected this year.
Recent interest rate cuts in Europe may be helping buoy sentiment. Theoretically, stronger economic growth worldwide would lead to heavier spending for the capital goods manufactured by industrial giants.
Stocks in that group rising sharply Tuesday included Caterpillar, up $3.38 to $54.75; Briggs & Stratton, up $1.94 to $57.19; Georgia-Pacific, up $3.56 to $84.63; and Nucor, up $1.56 to $52.31.
Strength in Asian and European stock markets set a good tone for Wall Street. Tokyo shares rose 1.3%, Hong Kong rallied 1.3% and the German market was up 0.9%.
Among Tuesday’s highlights:
* Auto stocks were hot, also benefiting from economic optimism. GM jumped $2.31 to $90.44, Ford gained $1.69 to $63.19 and DaimlerChrysler was up $1.38 to $98.63.
* Positive earnings reports lifted stocks in the financial services sector. Broker PaineWebber surged $3.69 to $47.25 after releasing its quarterly report.
But Merrill Lynch retreated $2.56 to $97.38 despite its announcement of strong first-quarter profit. Analysts suggested investors may have zeroed in on weaker investment banking revenue at Merrill.
Los Angeles-based brokerage Jefferies Group jumped $5.81 to $61.38. It reported higher-than-expected first-quarter operating income and said it will soon launch a new electronic trading system for institutional investors.
* Among heavily traded tech stocks, Dell lost $1.38 to $40.44, Microsoft dropped $2.88 to $90.13 and Oracle was off $1.38 to $23.63.
But PairGain Technologies of Tustin rose $2.25 to $12.50 as the telephone equipment maker was reiterated as a “buy” by analyst Alfred Tobia at NationsBanc Montgomery Securities.
* Qwest Communications gained $5.25 to $96.13 as the No. 4 U.S. long-distance phone company and the Netherlands’ Royal KPN said they plan to sell shares in their KPNQwest joint venture this year.
* In the Internet sector, SkyMall sank $6.88 to $16.25 as the in-flight catalog company said it expects first-quarter sales of $13 million, down from $13.2 million a year earlier. But Xoom.com leaped $14.63 to $91.50 as the online direct-marketing company confirmed it held talks recently that could lead to a change in control.
Market Roundup, C9
