Finance Stocks Power Broad Rally
Financial shares fueled a rally in U.S. stocks Friday after a government report on productivity eased investors’ concern that the Federal Reserve will raise interest rates for a third time this year when policymakers meet Tuesday.
“It’s another bit of evidence that the Fed won’t raise interest rates, and it’s good for equities,” said Guy Truicko of Unity Management in Garden City, N.Y.
The Dow Jones industrial average rallied 174.02 points, or 1.6%, to 10,769.32, its biggest percentage gain in two weeks. The broader Standard & Poor’s 500 index rose 14.60 points, or 1.1%, to 1,396.06.
The Nasdaq composite index rose to its 10th closing record in 11 sessions in active trading. The index climbed 23.86 points, or 0.8%, to 3,221.15, rebounding from an early 72-point loss as Qualcomm soared again, this time on a favorable report from a J.P. Morgan analyst.
Five stocks rose for every four that fell on the New York Stock Exchange, where volume was strong.
Financial stocks rose after the Labor Department reported U.S. worker productivity rose more than expected in the third quarter and labor costs grew at a slower rate.
The bond market rallied on the strength of the productivity report, sending the benchmark 30-year U.S. Treasury yield to a seven-week low of 6.03%, from 6.06% the previous session.
Financial issues also may have gained as President Clinton signed a law that could speed consolidation among banks, brokerages and insurance companies.
American Express stormed up $8.50 to $154.25, J.P. Morgan climbed $6.56 to $139.31, Citigroup rose $2.75 to $54.88, Morgan Stanley Dean Witter jumped $7.69 to $120 and Merrill Lynch rocketed $7.69 to $83.19.
Qualcomm zoomed $32.50 to a record $378 after a J.P. Morgan analyst said he expects the wireless technology giant to reach $460 (not accounting for future stock splits) in the next 12 months. The stock is up 1,359% this year.
Nasdaq was lower for much of the day, dragged down by Intel. The stock fell $3.25 to $76.19 after a Merrill Lynch analyst cut his rating on concern that the No. 1 computer-chip maker faces stiffer competition from Advanced Micro Devices. AMD said Thursday it “may break even in the fourth quarter” on increased demand for its new Athlon chip, which competes with Intel’s Pentium III processor.
AMD gave back $1.69 to $26.56 after a big jump the day before.
Friday’s trading left the Dow up 0.6% for the week and the S&P; 500 up 1.9%. But Nasdaq continued to pace the market, climbing 3.8% after rising 4.5% last week and 5.3% the week before.
The technology-heavy index is up 47% in 1999, while the Dow is up 17.3%.
Among Friday’s highlights:
* Dell Computer, the biggest direct seller of personal computers, slid $1.69 to $41.75 after reporting revenue growth that fell short of analysts’ expectations.
But investors bid up Gateway $5.19 to $81.50, Sun Microsystems $4.56 to $119.31 and Oracle $3.06 to $65.13.
* Sunnyvale, Calif.-based Finisar (ticker symbol: FNSR), which makes fiber-optic equipment for speeding up network communications, was the latest sensation among initial public offerings, as its shares rocketed $67.88, or 357%, to $86.88.
Other IPOs gained, including: Internet marketing firm NetCreations (NTCR) of New York, up $7 to $20; mouse and joystick designer Immersion (IMMR) of San Jose, up $6.63 to $18.63; chip equipment supplier Rudolph Technologies (RTEC) of Flanders, N.J., up $6.94 to $22.94; and telecom equipment maker Somera Communications (SMRA) of Santa Barbara, up $1.44 to $13.44.
* The Internet-brokerage sector had its best day since April as investors bet that online stock and bond trading will soar in coming months. Charles Schwab surged $5.94 to $42.88, E-Trade Group climbed $5.81 to $36.75, Ameritrade Holding rose $2.75 to $21.94 and TD Waterhouse Group gained $2 to $16.63.
* Internet Capital Group tumbled $18.75 to $159.31 after the holding company with interests in business-to-business electronic commerce said it will report losses in “many quarters for the foreseeable future.” Its third-quarter loss widened to 13 cents a share from 7 cents a year earlier after it acquired interests in four companies.
Market Roundup, C4
