Neither Monday's intraday reversal nor news of an investigation into IBM's ( IBM) accounting proved sufficient to knock major proxies down Tuesday. Stocks failed to sustain intraday highs but ended with modest gains in what many traders suggested was further evidence of the market's bullish tone. After trading as high as 8940.38 at midday, the Dow Jones Industrial Average stumbled in the afternoon, before rallying again in the final two hours to close up 0.3% to 8922.95. Following a similar pattern, the S&P 500 rose 0.5% to 971.56 vs. its intraday best of 973.02. The Nasdaq Composite gained 0.8% to 1603.56, a smidgen below its intraday high but its first close above 1600 since May 31, 2002. Trading volume was 1.3 billion on the Big Board and 1.9 billion in Nasdaq trading, both down from recent days. Down volume was 53.5% of the Big Board's total, while upside volume accounted for 63% of over-the-counter activity. While IBM fell 4.2% and restrained the Dow, the Comp was buoyed by smaller-cap tech names such as Brocade ( BRCD), which jumped 19.2% following a Merrill Lynch upgrade. In a story that garners more media attention than market influence, Martha Stewart Living Omnimedia ( MSO) fell 16.2% on word that its founder and namesake faces indictment for insider trading violations.
Living in Different Worlds
With equities in a relatively tame state, the focus shifted again to Treasuries, where yields fell sharply after a speech by Federal Reserve Chairman Alan Greenspan. The price of the benchmark 10-year Treasury rose 21/32 to 102 15/32, its yield falling to 3.33%. Indicating heightened expectations for a rate cut later this month, the yield on the two-year note fell to 1.20%, its lowest level since 1950 and below the fed funds target rate of 1.25%. The yield on the five-year note fell to 2.23%, its lowest level since 1954, according to Bloomberg.