Stocks Climb as Bond Yields Sink
Stocks rallied Tuesday as investors bet on better times ahead in the wake of an encouraging outlook from chip maker Micron Technology and a broker’s bullish calls on blue chips Boeing and McDonald’s.
Bond yields plunged to new lows, meanwhile, on growing expectations of another interest rate cut.
Micron, one of the world’s biggest makers of computer memory chips, told a New York conference that its fiscal third-quarter production was running slightly above forecasts.
“When a technology bellwether comes out and says that demand is better than thought, it’s positive for the market,” Jeff Swensen, senior trader at John Hancock Funds, told Reuters. “Investors are still focused on the big picture, which is that the economy is going to be better in the second half.”
The Dow Jones industrial average climbed back above 9,000, rebounding from Monday’s sell-off with a gain of 74.89 points, or 0.8%, to 9,054.89; the broader Standard & Poor’s 500 index rose 8.91 points, or 0.9%, to 984.84; and the tech-heavy Nasdaq composite index advanced 23.70 points, or 1.5%, to 1,627.67.
Winners outnumbered losers by about 5 to 2 on the New York Stock Exchange as a late surge widened the day’s gains. Volume was light, however.
Treasury yields fell after comments from Federal Reserve Gov. Donald Kohn, who said inflation was falling faster than the central bank had expected. The yield on the benchmark 10-year T-note sank to 3.19%, a 45-year low, from 3.28% on Monday.
Fed Chairman Alan Greenspan helped take the shine off the stock rally early in the day when he told a congressional committee that if natural gas prices stay “elevated” they could hurt the economy. Spot market prices for natural gas are about double those of a year ago.
Shares of big electricity generators that burn natural gas dropped, including Reliant Resources, down 16 cents to $6.30, and Dynegy, off 30 cents to $4.09.
The tech stock sector got a boost from Micron, which rose 84 cents, or 6.8%, to $13.15.
Elsewhere, CDW Computer Centers rose $2.27, or 5.8%, to $41.58 after an upgrade from S&P; analysts, and software maker Citrix Systems climbed $1.08, or 5%, to $22.69. Siebel Systems jumped $1.06, or 10%, to $11.70 on takeover speculation fueled by a Wall Street Journal article.
Nokia’s U.S.-traded shares slid 25 cents to $17.71, however, after the cell phone maker warned that revenue has been crimped by a weak dollar, sluggish economies in the U.S. and Europe, and the SARS outbreak in China.
After the close of trading, Texas Instruments also warned of slower sales because of SARS. The stock, which rose 17 cents in regular trading to $20.39, slipped to $19.37 after hours.
Banc of America Securities helped lift Dow stocks Boeing and McDonald’s. Boeing gained $1.14 to $34.31 after the brokerage raised its rating to “buy” from “neutral,” and McDonald’s added 80 cents to $21.67 after BofA raised its price target to $26 from $21, saying the fast-food chain is in the early stages of a turnaround.
In other highlights:
* Newmont Mining fell $1.15 to $31.50 after two brokerage analysts downgraded the stock of the world’s largest gold producer to “neutral.” Gold slid 2.6% to $352.20 in commodity trading.
* Topping the NYSE’s most actively traded list was mortgage finance giant Freddie Mac, which shook up its management team Monday amid accounting questions. Its shares rebounded $1.24 to $51.50, recouping some of Monday’s 16% plunge. Fannie Mae slid $1.44 to $69.87, however, adding to Monday’s drop.
* Kmart Holding surged $1.90 to $19.60 as the discount retailer began Nasdaq Stock Market trading. It had been listed on the over-the-counter bulletin board since issuing new common stock and exiting bankruptcy.
