John J. Edwards III
Nasdaq Composite Index
continues to lead the equity side, pushing deeper into record territory on further strength in its biggest names. Meanwhile, the
Dow Jones Industrial Average
is sliding away from the maddeningly elusive 8000 level to below 7900.
That's just the way some market mavens like it.
Stock players are nervously giddy or giddily nervous at the prospect of a market at these lofty levels. A good old sector rotation looks like just the thing to soothe those jangled nerves and put more money into pockets at the same time.
"It tells you that people are getting out of their winners but they're still staying in the market," said Bluford Putnam, president of
CDC Investment Management
. "I think the market's high, but I'm not looking for a correction."
The huge flood of investor capital into mutual funds has been the main driver of the big-cap indices' propulsive rise, Putnam said. All that money flowed naturally into the biggest names, because that's where the liquidity is. "It's easier to put it to work in liquid stocks and do your analysis later," he said.
When money managers finally got around to doing a little analysis, they found little reason to flee the large-caps, he said. Profit growth has been extraordinary, and companies are more efficient and productive than they've been in ages. "These big companies are doing a great job of managing themselves," Putnam said. "If you were looking at this in the '80s, you never would have said that." That solid base will keep the current sector rotation more modest than it might otherwise have been, he said.
Philip Tasho, head of equity strategy and management at
Riggs Investment Management
in Washington, agreed that the current shift is a fine thing. "I think it's important, for the market to remain healthy, for it to broaden out," he said. "We're seeing confidence in a good second quarter for corporate profits and belief that the economy will remain on the growth path both this year and into 1998."
Regardless of sector shifting, Tasho said, the broad market is doing far better this year than he ever imagined. He said his forecast at the start of 1997 called for the Dow to finish the year around 7400 and the
to come in at 820. The S&P's around 915 today. Tasho gave the credit to the inflation picture, which he had thought would show a rate of 3% to 3.5% for the year. It now looks more like 2% to 2.5%, he said.
There's a flood of earnings reports on this "Super Tuesday," but a couple stand out. Around noon,
was up 10 1/4 to an all-time high of 107 3/4 after reporting second-quarter earnings of $1.07 per share. That crushed the 23-analyst
consensus estimate of 87 cents and the year-ago 21 cents. TI's CFO told
he sees 10% growth in 1997 in the global semiconductor market, even though memory-chip prices have been slumping.
reported second-quarter earnings of $2.10 per share, a penny better than the 21-analyst First Call view and up from the year-ago $1.86. Yet the stock was down 3 1/8 to 125 3/8 in a mixed-to-up banking sector. An answer might be found in a statement in Citicorp's earnings release from Chairman John Reed: "We continue to produce good results, although global spread compression and our U.S. card business present challenges." Investors are worried enough about high bank valuations without loose talk of "challenges," Mr. Reed.