Thursday: Dow Punches Past 7700 as Bonds Rally
By
John J. Edwards III
Staff Reporter
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
Fed
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
S&P 500
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
Intel's
(INTC) - Get Report
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
Russell 2000
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.
Back on
April 29, when the Dow closed at 6962.03,
Merrill Lynch
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
Nikko Securities
, 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
unit of
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.
Cyrix
(CYRX) - Get Report
lost 1 1/8 to 20 7/8 on a downgrade to market outperform from the recommended list at
Goldman Sachs
.
Cowen
downgraded Intel and
Advanced Micro Devices
(AMD) - Get Report
to neutral from buy, sending AMD down 1 3/8 to 38. Also suffering was
Applied Materials
(AMAT) - Get Report
, 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.
Gateway 2000
(GTE:NYSE) rose 3/4 to 63 1/2,
Dell
(DELL) - Get Report
rose 2 3/8 to 112 3/16 and
Hewlett-Packard
(HWP)
rose 3/8 to 52 1/2.
Away from the hardware sector, networkers were mixed, with
Ascend
(ASND) - Get Report
up 15/16 to 42 1/2,
Cisco
(CSCO) - Get Report
up 1/16 to 63 25/32,
Bay Networks
down 3/8 to 23 and
3Com
(COMS)
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.
Elsewhere,
IBM
(IBM) - Get Report
managed to recover for a gain of 1 to 88 1/8. The company's CFO, Richard Thoman, resigned to join
Xerox
(XRX) - Get Report
as president and chief operating officer. Xerox gained 2 to an all-time high of 71 3/4.
Polo anyone? Polo
everyone
?
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,
Gucci
(GUC)
added 5/8 to 73 1/2,
Mossimo
(MGX)
weakened 1/4 to 8 3/8 and
Donna Karan International
(DK) - Get Report
was unchanged at 12 1/8.
Tobacco stocks puffed higher despite a congressman's release of damning documents from
Brooke Group's
Liggett
unit and the filing of a new antitobacco suit by the state of California.
Philip Morris
(MO) - Get Report
rose 1 7/8 to 44 1/2,
Lorillard
parent
Loews
(LTR)
rose 2 1/2 to 101 and
RJR Nabisco
(RN)
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.
Chase
(CMB)
rose 1 3/8 to 100 3/4,
NationsBank
(NB)
rose 3/4 to 66 1/2 and
Wells Fargo
(WFC) - Get Report
rose 5 3/4 to 276 1/8.
Visx
(VISX)
collapsed 5 7/8 to 22 1/4 after warning that its second-quarter and 1997 earnings would fall short of expectations. The
First Call
consensus estimates are 22 cents per share for the quarter and 98 cents for the year.
Harnischfeger
(HPH)
gained 2 1/4 to 43 after saying it may drop its $19-per-share hostile bid for
Giddings & Lewis
(GIDL)
because of a competing bid from
Thyssen AG
. Giddings bounced 1 13/16 to 20 47/64.
CKE Restaurants
(CKR)
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.
UBS Securities
upgraded
Champion International
(CHA) - Get Report
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
Georgia-Pacific
(GP)
, up 1 1/2 to a 52-week high of 89 5/8, and
International Paper
(IP) - Get Report
, 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
(UMG)
sold its 4.4 million-share stake in
Time Warner
(TWX)
to
Salomon Brothers
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
removed
Fruit of the Loom
(FTL)
from its recommended list. FTL dropped 3/4 to 33 1/8.
Iomega
(IOM)
continued to leap higher, gaining 1 to 21 amid heavy Internet chat-board chatter about its post-close conference call.
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