John J. Edwards III
The blue-chips are screaming as Wall Street starts popping corks in anticipation of a Fed-less summer.
The run for the
Dow Jones Industrial Average
looks like it is all about the curmudgeonly
and the perceived dead certainty that it will keep interest rates steady at its July policy meeting. The tireless blue-chip measure vaporized two century marks, shooting up 135.64, or 1.8%, to a record 7711.47. It's up a stunning 20.6% from its April 11 trough at 6391.69, and up 19.6% on the year. The broader
also set a new high, up 13.89, or 1.6%, to 883.46.
Market players embraced the idea that this morning's surprisingly soft May retail sales report meant the Fed would stand pat. The bond market soared, with the yield on the bellwether 30-year Treasury bond whistling down to 6.76%.
Robust inflows into stock mutual funds also contributed to the massive rally. The
Investment Company Institute
estimated that stock funds attracted $18.5 billion in May, up from $15.7 billion in April.
Technology stocks, however, took another pounding, primarily in the hardware sector. The group suffered from concerns about PC sales and worries about the pace of semiconductor-related sales. The
Nasdaq Composite Index
, weighed down by
loss of 3 13/16 to 143 21/32, could muster only a slight move above break-even. It finished at 1411.32, up 3.47 but short of its Monday record of 1412.17. The small-cap
rose 1.92 to a record 389.54.
Unsurprisingly, market internals were firmly positive.
New York Stock Exchange
advancers swamped decliners by 1,868 to 729 on volume of 598 million shares, the third-highest volume of 1997. The Big Board featured 435 new highs and just 13 new lows. On the Nasdaq, 2,243 advancers beat 2,040 decliners on 639.5 million shares.
April 29, when the Dow closed at 6962.03,
strategist Lisa Cohen said stocks still looked extended. And now? "I'll give you three guesses, and the first two don't count," she said. "It's looking toppy. But with bond prices coming down, there's support there."
Cohen added a note of warning to market mavens thrilled with the signs of a more sluggish economy: "A slowing economy and slowing sales are not good for stocks in the long run, so we'll see what happens."
More cautionary words came from Robert Brusca, chief economist at
, who said the decline in May retail sales impressed him not a bit. "I think that the Fed's going to be raising rates, and they may be raising rates in July," he said. "This is not the last retail sales report the Fed will see before the meeting. It's a good time not to put all your eggs in one basket."
Stanley Nabi, chief economist and chairman of the investment policy and planning committee at the
Wood Struthers & Winthrop
Donaldson Lufkin & Jenrette
, said the market's recent performance has left him numb. "What's happening here is complete capitulation by the bears," he said. "I have no intention of being part of the stampede."
Nabi said he has been "selling on the margins, so if the market comes down I'll have some currency to buy with." And he does see the market coming down: "I think sometime between now and the end of the summer, we're going to get clocked."
Thursday's market action
As noted, techs mainly tumbled today.
lost 1 1/8 to 20 7/8 on a downgrade to market outperform from the recommended list at
downgraded Intel and
Advanced Micro Devices
to neutral from buy, sending AMD down 1 3/8 to 38. Also suffering was
, which fell 1 7/8 to 60 1/8. The
Philadelphia Stock Exchange Semiconductor Index
gave up 4.13 to 287.96.
Some other tech issues ended higher as investors hunted for bargains.
(GTE:NYSE) rose 3/4 to 63 1/2,
rose 2 3/8 to 112 3/16 and
rose 3/8 to 52 1/2.
Away from the hardware sector, networkers were mixed, with
up 15/16 to 42 1/2,
up 1/16 to 63 25/32,
down 3/8 to 23 and
down 5/8 to 46 31/32. The group remains a focal point for investors seeking guidance on how to read the technology group as the traditionally slow summer season approaches.
managed to recover for a gain of 1 to 88 1/8. The company's CFO, Richard Thoman, resigned to join
as president and chief operating officer. Xerox gained 2 to an all-time high of 71 3/4.
Polo anyone? Polo
Polo Ralph Lauren
(RL:NYSE) debuted on the NYSE at 26 and zipped up 5 1/2 to 31 1/2 on volume of nearly 20 million shares. Among other high-fashion stocks,
added 5/8 to 73 1/2,
weakened 1/4 to 8 3/8 and
Donna Karan International
was unchanged at 12 1/8.
Tobacco stocks puffed higher despite a congressman's release of damning documents from
unit and the filing of a new antitobacco suit by the state of California.
rose 1 7/8 to 44 1/2,
rose 2 1/2 to 101 and
rose 1 3/8 to 34. Brooke Group was unchanged at 4 3/4.
Banks, bolstered by the bond market's plummeting interest rates, jumped higher.
rose 1 3/8 to 100 3/4,
rose 3/4 to 66 1/2 and
rose 5 3/4 to 276 1/8.
collapsed 5 7/8 to 22 1/4 after warning that its second-quarter and 1997 earnings would fall short of expectations. The
consensus estimates are 22 cents per share for the quarter and 98 cents for the year.
gained 2 1/4 to 43 after saying it may drop its $19-per-share hostile bid for
Giddings & Lewis
because of a competing bid from
. Giddings bounced 1 13/16 to 20 47/64.
moved up 1/8 to 26 3/4 after reporting first-quarter earnings of 31 cents per share, well ahead of the First Call view of 26 cents and the year-ago 19 cents.
to strong buy from hold, sending it up 3 1/2 to a 52-week high of 52 5/8. Champion and other paper companies said
yesterday that they plan to raise prices. Fellow paper makers gaining ground today included
, up 1 1/2 to a 52-week high of 89 5/8, and
, up 1 to an all-time high of 51 3/8. Analysts believe steady economic growth will help paper concerns maintain decent pricing.
Bringing an end to a long-troubled relationship,
U S West Media Group
sold its 4.4 million-share stake in
for $220 million. Time Warner dipped 3/8 to 49 5/8 and U S West Media advanced 3/8 to 22 1/4.
Grab your drawers!
Credit Suisse First Boston
Fruit of the Loom
from its recommended list. FTL dropped 3/4 to 33 1/8.
continued to leap higher, gaining 1 to 21 amid heavy Internet chat-board chatter about its post-close conference call.
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