Stock Rally Is Muffled by Worries
Caution asserted itself Monday on Wall Street as investors, still nursing doubts about when the economy will improve, bought stocks but made few major commitments.
Blue chips managed a moderate rally on gains in a handful of energy and technology issues, but the overall market was less robust in a choppy and unusually quiet session.
The Dow Jones industrial average closed up 71.11 points, or 0.7%, at 11,061.52. Among broader indicators, the Standard & Poor’s 500 index rose 6.44 points, or 0.5%, to 1,267.11, and the Nasdaq composite index advanced 6.49 points, or 0.3%, to 2,155.93.
It was the third straight gain for all three indexes, but analysts weren’t impressed. Volume was light, with the New York Stock Exchange recording its second slowest trading session of the year. The Nasdaq Stock Market, according to early figures, looked to break its low-volume record for 2001.
Winners outpaced losers 2 to 1 on the NYSE, 10 to 9 on Nasdaq.
“Overall, what you’re seeing here is a rally in a few high-priced Dow stocks, but not any kind of a broader, more powerful move on the larger market,” said Richard Dickson, technical analyst at Hilliard Lyons.
Caution spilled over to the technology sector, making for a mixed session. IBM rose 75 cents to $113.64, and Intel fell 24 cents to $28.50 on worries the chip maker will issue an earnings warning at a mid-quarter update scheduled this week.
Oil and pharmaceutical stocks were stronger. Exxon Mobil gained $1.88 to $90.83, rising with other oil-sector stocks amid an OPEC meeting. Johnson & Johnson rose $2.14 to $100.14.
Investors have been skittish in recent weeks on concerns that an anticipated fourth-quarter recovery for corporate profits might not happen. The market rallied strongly in April and early May, but a mix of conflicting economic data and earnings warnings since then have unnerved investors.
Adding to those worries are the second-quarter earnings due out in a few weeks. Those results are expected to be disappointing, but the murky economic outlook has intensified worries that more companies than expected will have weak returns. The tech sector is considered especially vulnerable.
Wall Street appeared unsure of how to react to a statement by Federal Reserve Chairman Alan Greenspan that he was encouraged by signs that U.S. gasoline prices might decline, but that the Fed is keeping a close watch for signs of potential inflationary pressures.
Concerns about inflation could prompt the Fed to be less aggressive in cutting interest rates. Although the central bank has reduced rates five times already this year, investors are counting on more cuts to stimulate the economy. The Fed’s next meeting starts June 26.
Greenspan’s comments were warmly received in the Treasury bond market, which rounded out its biggest four-day gain in three months Monday.
“Bonds were so knocked out last month because of fears of inflation, it’s no surprise they are having a good run after Greenspan’s comments,” said Jeff Given, a fixed-income manager at John Hancock Funds in Boston.
The yield on the most actively traded 30-year bond fell to 5.69% from Friday’s close of 5.70% and down from 5.86% a week ago. That’s the biggest four-day decline in yields--which move in the opposite direction of a bond’s price--since the end of February.
The yield on the benchmark 10-year Treasury note fell to 5.34% from 5.37% Friday. Among shorter maturities, the yield on the two-year Treasury note slipped to 4.17% from 4.20% Friday.
The dollar rose against the euro on doubts that the European Central Bank will be able to prop up its flagging currency. Traders pushed the euro below 85 U.S. cents for a third day, and to less than a quarter-cent above its six-month low.
Market Roundup, C11, C12
