Fed’s Inaction Gives Lift to Bank, Brokerage Stocks
Financial stocks rallied on investor relief Tuesday when the Federal Reserve did the expected: nothing.
“This is a positive, particularly for financial stocks,” said Marshall Front, managing director of Front Barnett Associates in Chicago. “Overall for the market, it means there are fewer head winds to fight.”
Although investors drove bank and brokerage stocks higher after the Fed left interest rates unchanged, they stayed away from many other sectors of the market. The Nasdaq composite index and Standard & Poor’s 500 were little changed, though the Dow mustered a gain of 0.5%.
Fifteen stocks rose for every 14 that fell on the New York Stock Exchange, where volume was moderate, while losers barely outnumbered winners on Nasdaq.
The Dow advanced 59.34 points to 11,139.15; the Nasdaq rose 5.06 points, or 0.1%, to 3,958.21; and the S&P; 500 lost 1.35 points, or 0.1%, to 1,498.13.
Financial gainers included J.P. Morgan, up $3.56 to $148.50; Wells Fargo, up $1.19 to $45.56; Chase Manhattan, up $1.81 to $52.75; PNC Financial Services, up $2 to $59.13; and Raymond James Financial, up $1.75 to $26.50.
The S&P; financials index has surged 42% from its low in February and 18% in the third quarter.
Bond yields were flat.
In Tuesday’s commodity trading, crude oil futures dropped as fears eased that Hurricane Debby might curb supplies. But a later report showed that U.S. crude oil inventories unexpectedly plunged last week to a 24-year low, and futures rose in electronic trading on the New York Mercantile Exchange.
In the currency market, the euro slid below 90 cents.
Among the equity highlights:
* AMR rose $1.19 to $33.81 after Goldman Sachs raised its third-quarter profit estimate for the parent of American Airlines to $1.75 a share from $1.65.
But U.S. Airways Group fell $1.25 to $34.25 as Goldman cut its third-quarter forecast to 15 cents a share from 50 cents.
Goldman said airline industry revenue remains strong, with American benefiting the most from delays and cancellations that have plagued UAL’s United Airlines, and U.S. Airways gaining the least.
UAL fell 31 cents to $48.63.
* Rallying in the tech sector were Nortel Networks, up $1.81 to $82.81; Intel, up 6 cents to $72.13 for its eighth straight gain; Microsoft, up 63 cents to $71.25; and Adobe Systems, up $2.38 to $122.25.
But many telecom stocks gave ground, including Sprint PCS, which slipped $3.19 to $49.
* Medtronic sank $1.31 to $49.69, after the world’s largest manufacturer of pacemakers reported quarterly sales that fell short of expectations.
* Scient dropped $6.88 to $38.75 after Credit Suisse First Boston initiated coverage with a “hold” rating. Its analyst said the Internet services provider could see revenue hurt by “a demand slowdown from ‘dot-coms.’ ”
* Nvidia fell $7.38 to $70.81 after the maker of computer processors for graphics software said second-quarter profit more than tripled--news that may already have been priced into the shares, which are up almost 233% this year.
* Mercator Software slid $3.05 to $13.77. The chief financial officer quit and the company fired two other executives after restating first- and second-quarter earnings to include underreported expenses.
* Retail stocks were strong, with the Gap adding $1.25 to $28.38 and Target adding $1.25 to $27.50.
* DSP Group rose $3.63 to $46.94 as the electronics maker will replace Burr-Brown in the S&P; mid-cap 400 index after the close of trading Thursday. Burr-Brown is being acquired by Texas Instruments.
* Among Southern California stocks, OSI Systems of Hawthorne lost $1.13 to $8.25 after reporting a quarterly profit of 11 cents a share, versus a loss of 7 cents a year earlier.
Sylmar-based MiniMed fell $6.30 to $72.64 as the maker of diabetes-treatment products was cut to “accumulate” from “strong buy” by an analyst at Prudential Vector Healthcare Group.
Broadcom of Irvine rose $2.38 to a new high of $262.19.
In foreign trading, Japan’s Nikkei stock average rose 2.6%, its biggest gain in 3 1/2 months, as a bullish earnings forecast from Toshiba brightened the computer chip industry’s outlook there.
Elsewhere, Brazil’s main index rose 0.8%., and European indexes were mixed.
Market roundup, C8-9
