Markets Rise on Reassuring Inflation News
A benign inflation report pushed long-term bond yields lower Friday and sparked a rally in financial stocks that led the broad market higher.
The Nasdaq composite index, meanwhile, recovered from an early tech-stock sell-off to finish at yet another new high, up 0.7% to 3,620.24.
The blue-chip Dow Jones industrials gained 89.91 points, or 0.8%, to 11,224.70, boosted in part by a surge in shares of American Express, up $7.94 to a record $167.75.
Bank, brokerage and other financial shares rose as the yield on the bellwether 30-year Treasury bond skidded to 6.16%, down from 6.21% on Thursday and the lowest daily close since Nov. 19.
The government’s report on November wholesale inflation showed that, outside of food and energy, inflation pressures remain subdued.
Bond investors took “a whole lot of comfort in these numbers,” said Greg Habeeb, who invests $2 billion in bonds at the Calvert Group in Bethesda, Md.
Other reports this week suggested that the economy remains on a solid growth track. As long as inflation doesn’t flare, this environment is practically perfect for stocks, many analysts note.
Many tech shares rallied again on Friday, lifting the Nasdaq index’s year-to-date gain to 65%. The index rose 2.8% for the week.
But the broader market remains far less robust. The Dow actually lost 61 points for the week. And on Friday, rising stocks only slightly outnumbered losers on the New York Stock Exchange and on Nasdaq.
Profit-taking clipped many tech stocks as trading opened Friday, but buyers quickly swarmed again.
“Investors who have seen very substantial gains may have some desire to lock in profits,” said John M. Bartlett at Commerce Bank in St. Louis. “But there’s no significant reason to sell.”
Even so, IBM was among the Dow’s weakest performers, sliding $4.38 to $109. The company has said year 2000 computer-bug-related spending freezes at many companies will hurt earnings performance for the next several quarters.
And troubled Xerox slumped $3.56 to $19.88 in late trading after the company said current-quarter earnings could be 40% short of Wall Street’s estimates.
Among Friday’s highlights:
* Tech stock winners included Oracle, up $6.06 to a record $84.63; Cisco Systems, up $1.19 to $99.81; Emulex, up $9.88 to $174.38; and Computer Sciences, up $4 to $76.
But Apple fell $2.25 to $103, Micron Technology lost $3.25 to $60.25 and Applied Materials fell $3.25 to $109.44.
* In the Internet sector, Yahoo continued its stunning surge, up $13.50 to a record $353.50. America Online also hit a new high, up $5.25 to $91.50.
Yahoo has rocketed 66% since Standard & Poor’s announced that the company would join its index of 500 widely held stocks.
* Financial stocks rebounding included Merrill Lynch, up $2.13 to $82.06, and Bank of America, up $2.69 to $53.63.
* Among blue chips, General Electric jumped $3.44 to a record $147. Many analysts expect the company to announce a stock split next Friday.
* Energy stocks were broadly lower as crude futures in New York slid 92 cents to $25.23 a barrel.
Market Roundup, C4
