Dow Leaps 191, High Above Broad Market
Blue-chip stocks were off to the races on Thursday, while the broad market struggled to tag along.
The Dow Jones industrial average broke out of its recent sideways trading range, soaring 191.52 points, or 2.1%, to 9,467.40 as investors focused on the benefits to big-name companies of the U.S. economy’s ongoing strength.
In the bond market, where interest rates are near seven-month highs precisely because of that economic strength, yields held steady Thursday ahead of today’s government report on February employment trends.
In other trading, the dollar continued to soar against the yen, as Japan’s overnight loan rate between banks stayed close to zero, while long-term Japanese bond yields also fell.
And in Brazil, the new central bank chief wasted no time in sending a message to the market that he will not tolerate inflation: Just five hours into his new post, Arminio Fraga boosted short-term interest rates to 45% from 39%, and sold dollars to bolster the real. Brazil’s main stock index responded with a nearly 4% gain.
Wall Street’s rally was concentrated in blue chips. Though most other indexes also rose, the gains were more modest. The Nasdaq composite, for example, rose 1.2%; the Russell 2,000 index of smaller stocks inched up just 0.5%.
Winners barely edged losers on Nasdaq, though they had a 17-to-12 lead on the Big Board.
The fresh interest in blue chips stemmed from data pointing to the sales gains large companies are enjoying in the strong economy.
General Motors, for example, leaped $2.88 to $85.75 amid hefty February car sales. Also, Wal-Mart jumped $2 to $89.38 on news of healthy February sales. Another Dow stock, IBM, soared $4.25 to $171 after Dell Computer announced a big deal to buy IBM computer parts.
The Dow also got a boost from Exxon, up $2.13 to $67.81, and Chevron, up $1.31 to $79.31, which led energy stocks higher as crude oil prices hit a two-month high.
Today’s employment report will provide a major test for stocks and bonds: A robust gain in new jobs could send bond yields even higher on fears that the Federal Reserve would soon move to tighten credit.
The 30-year Treasury bond yield, which was unchanged Thursday at 5.69%, has surged from 5.25% on Feb. 3.
But in the stock market, Thursday showed that many investors are focusing on the benefits of the strong economy, not the downside.
Among Thursday’s highlights:
* Dell got only a modest boost in the wake of its IBM deal--rising 94 cents to $81.88--and tech stocks in general were mixed.
Intel fell $1.31 to $113.38 and Hewlett-Packard lost $1.38 to $67.44, while Microsoft rose $2.63 to $152.25.
* Auto and auto-parts stocks were in demand, with Ford up $1.56 to $58.38 and Goodyear up $1.88 to $49.13.
* In the retail sector, other names rising in response to February sales data included Circuit City, up $6.19 to $63.25, and Ann Taylor, up $2.75 to $41.75. Also, Sears jumped $3.13 to $43.75 after naming former Safeway executive Julian Day as chief financial officer.
* Energy stocks rallying sharply included Schlumberger, up $4.63 to $56.38; Enron, up $1.63 to $65; and Royal Dutch, up $2.19 to $45.69.
* Many financial stocks were higher, which some analysts suggest means that interest rates may be topping out. Merrill Lynch zoomed $6.69 to $84.38 and Chase Manhattan surged $2.69 to $83.38.
* International Game Technology plunged $3.63 to $14.69 after the slot-machine maker said 1999 earnings may miss targets.
In currency trading, the dollar soared to 123.35 yen, up 1.58 yen, as Japanese long-term government bond yields tumbled to 1.68%, the lowest since Dec. 21, amid the central bank’s efforts to pump money into the economy.
The Japanese stock market barely budged, however.
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Retail King to Split
Wal-Mart Stores, the world’s largest retailer, said Thursday it will split its shares 2-for-1, raise its quarterly dividend 29% and buy back $1.2 billion in stock--all of which is likely to be well received by Wall Street. The news was announced after the end of trading, in which the stock closed up $2 to $89.38. The split will be effective April 19. The Bentonville, Ark.-based retailer has previously split its stocks 10 times, the last in 1993. The company has raised its dividend 27 straight years. Quarterly closes and latest on the New York Stock Exchange
Thursday: $89.38
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Source: Bridge, Bloomberg News
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Market Roundup, C6
