Stocks Stage Pre-Holiday Rally; Yields Fall
Stocks kicked off the third quarter with a rally Monday, albeit in an abbreviated session in advance of today’s holiday.
In other trading, longer-term Treasury bond yields fell amid new signs of a slowdown in the economy. That helped stocks, especially in interest-rate-sensitive sectors.
On Wall Street, the Dow Jones industrial average rose 112.78 points, or 1.1%, to close at 10,560.67. The Dow had fallen 9.1% in the first half of the year.
The Nasdaq composite, which lost 2.5% in the first half, gained 25.82 points, or 0.7%, to 3,991.93 on Monday.
Trading volume was extremely light, as markets closed three hours early. All markets will be closed today for Independence Day.
Still, the buyers in the market Monday were buying across the board, at least among Big Board stocks: Winners there topped losers by more than 2 to 1. On Nasdaq, winners had a 19-to-17 edge.
The bond market set a good foundation for stocks, as yields fell after a report showed prices paid by the nation’s manufacturers fell unexpectedly in June, suggesting inflation isn’t accelerating.
The National Assn. of Purchasing Management reported its prices-paid index dropped to 61.2 in June, compared with forecasts for 67.5 and May’s reading of 65.8.
That adds to evidence that the economy is slowing and that price pressures aren’t growing. The Federal Reserve left its key interest rate unchanged last week, and analysts believe more data pointing to an economic slowdown could prompt the Fed to declare its credit-tightening campaign over.
“People are looking for further signs of weakness, and this is confirmation that it exists,” said John Davidson, chief investment officer for Orbitex Management Inc.
The yield on the five-year Treasury note fell to 6.13% from 6.19% on Friday. The yield on the 10-year T-note slipped to 5.99% from 6.03%.
“The market is telling a pretty good story,” said Alan Ackerman, senior vice president at Fahnestock & Co. in New York. The NAPM report “was a favorable piece of news that I think will allow some interest rate jitters to fade away.”
The big news in the next few weeks will be second-quarter corporate earnings reports, analysts say. “We should start seeing a flow of positive earnings reports, and that could help the market break out of the range-bound condition it’s been in,” Ackerman said.
Among Monday’s highlights:
* Bank stocks were higher as bond yields fell. J.P. Morgan rose $5.63 to $115.75, Bank of America gained $2 to $45, SunTrust surged $3.19 to $48.88 and Bank One jumped $1.88 to $28.44.
* Utility stocks and real estate investment trust shares, which were hit hard Friday as some big investors took profits in winning sectors as part of end-of-quarter portfolio re-balancing, rallied Monday.
The Dow utility index jumped 2.5%. Among REIT shares, Mack Cali gained $1 to $26.06 and Spieker Properties jumped $1.69 to $47.69.
* In the Dow, “old-economy” names rallying included Caterpillar, up $2.13 to $36, and GM, up $1.56 to $59.63.
* Tech stocks opened the quarter mixed. Intel rose $3.19 to $136.88 and Cisco Systems gained $1.06 to $64.63, but Adobe Systems slid $2.13 to $127.88 and EBay fell $1.50 to $52.81.
Oracle fell $3.88 to $80.19. Late Friday, the company announced that Chief Operating Officer and President Ray Lane will leave his post.
* U.S.-traded Mexican stocks soaring along with the Mexican market, in the wake of Sunday’s election, included TelMex, up $5.69 to $62.88; Grupo Televisa, up $5.63 to $74.56; and Empresas ICA, up 25 cents to $1.94.
* Verizon, the company formed by the completion of the merger of Bell Atlantic and GTE, rose $4.19 to $55 on its first day of trading on the NYSE. The ticker symbol: VZ.
Elsewhere in the telecom sector, JDS Uniphase jumped $8.31 to $128.19, Tellabs gained $2.19 to $70.63 and Nokia rebounded $1.63 to $52.13.
* David’s Bridal rose $8.19 to $19.75 after May Department Stores said it would pay $20 a share to acquire the chain of stores that sells wedding gowns. May rose 50 cents to $24.50.
In foreign trading, Japan’s Nikkei stock average rose 1.2% on the first day of the new quarter. Germany’s DAX index rose 0.9% and Britain’s FTSE-100 surged 2.5%.
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Market Roundup, C9-C10
