Dow Hits New High; Growth, Tech Stocks Fall
U.S. stocks ended mixed Thursday as investors again took profits in consumer growth stocks and tech issues and bought industrial and financial shares.
Meanwhile, Asian markets were hit by profit-taking, with South Korea’s main index sliding 4.7% after reaching its highest level since 1996 earlier in the week.
On Wall Street, the Dow Jones industrial average reached its third straight record-high close, adding 32.93 points to end at 10,878.38.
The tech-heavy Nasdaq composite, meanwhile, fell 0.9%. The Standard & Poor’s 500--dominated by big growth stocks--lost 0.6%.
“It’s more of the same shift that has been evident all week and last week,” said Larry Wachtel, market analyst at Prudential Securities.
“Again, the Dow is doing well, the Nasdaq is slowing, financial and cyclical stocks are in the lead, technology and pharmaceutical stocks are in the dumpster,” Wachtel said.
Financial stocks were in demand Thursday as fresh data showing benign wage inflation pushed interest rates lower in the bond market. The 30-year Treasury bond yield fell to 5.52% from Wednesday’s 5.58%.
But while wages are under control, the economy is still growing at a brisk pace, data show.
“Cyclical” industrial stocks--those of companies whose fortunes ebb and flow with the economy’s cycles--have been on the upswing for several weeks as investors bet on stronger growth worldwide in the months ahead.
Copper mining giant Phelps Dodge, for example, surged $2.81 to $67.94 as copper prices reached a five-month high. Traders said Asian demand for copper is rising.
Other industrial winners included Cyprus Amax, up $1.25 to $15.63; Alcoa, up $2.69 to $64.69; chemical firm B.F. Goodrich, up $2.19 to $39.88; and Air Products & Chemicals, up $2.94 to $46.88.
Many energy shares also advanced, led by Mobil, up $5.06 to $107.19, and Phillips, up $2.19 to $51.25. Crude oil prices edged up to a 16-month high.
But Philip Orlando, chief investment officer at Value Line Asset Management, said that if indeed there is no inflation in the economy, the current advance in the shares of cyclical companies will be short-lived.
“Cyclical companies require a very robust economy with inflationary pressures in order to generate their earnings,” Orlando said.
But William Meehan, market analyst for Cantor Fitzgerald, said, “People are not buying the cyclicals because things are extraordinarily great now; they’re buying them because the world economy is seen as improving in the future.”
Meanwhile, investors continued to take profits in technology and drug shares that have soared over the last year.
Amazon.com plunged $25.25 to $168.25. The online retailer late Wednesday reported a narrower-than-expected first-quarter loss but said it expects growth to slow and losses to increase as it invests heavily in new businesses.
Other weak tech shares included Dell, off 56 cents to $41.06, and America Online, down $1.63 to $141.38.
Drug maker Pharmacia & Upjohn dropped $1.81 to $55.50, even after the company met analysts’ expectations with a 17% increase in first-quarter earnings.
Other classic growth stocks falling included Disney, down $2.13 to $30.38; Wal-Mart, down $2.31 to $46.88; Amgen, down $1.50 to $64.44; and General Electric, down $3.88 to $107.63.
Among Southland issues, Callaway Golf gained 69 cents to $15.63 after reporting higher earnings Wednesday.
In foreign trading, recently red-hot Asian markets took a breather. South Korea was hit the worst, but Singapore’s market fell 1% and Taiwan’s dropped 2.8%.
Market Roundup, C6
