Stocks gain despite rise in bond yields Dow up 8


February 26, 1993|By Bloomberg Business News

NEW YORK -- Stocks rose yesterday as a late round of computer-driven buy orders buoyed prices, and a rise in Treasury bond yields failed to dampen investor appetite for stocks.

The Dow Jones industrial average gained 8.64, to 3,365.14, extending Wednesday's 33-point gain. Rallies in Eastman Kodak and International Business Machines offset declines in Minnesota Mining & Manufacturing and Aluminum Co. of America.

Broader market indexes also rose. The Standard & Poor's 500 index, paced by stocks involved in computer systems, general retail stores, foods and insurance, gained 1.46, to 442.33. The NASDAQ Composite index rose 4.61, to 667.07, as the NASDAQ market withstood a plunge in shares of Amgen.

With bond yields remaining near record lows, investors appear reluctant to sell stocks in favor of fixed-income securities.

Amgen, the most active stock yesterday, plunged $9.25, to $37, after the biotechnology company said it expected first-quarter earnings to fall up to 15 percent below Wall Street estimates of 60 cents a share.

The Amgen statement prompted Wall Street analysts to temper their optimism about the biotech group and triggered declines in other biotech stocks. Drug stocks have also been falling on concern about government plans to control medical costs.

"The stock market is waiting to see whether the bond market's rallyis running out of steam," said Michael Lenahan, head of U.S. equity trading at James Capel. "If the bond market does fall apart, the stock market is in for a lot of trouble."

The stock market has been held in check since President Clinton outlined his economic plan last week, calling for raising taxes and cutting spending to reduce the federal budget deficit. The plan sparked concern that higher taxes would stifle the recovery and dampen corporate profits. But with Treasury bond yields below 6.9 percent, investors are reluctant to switch to fixed-income investments.

"People are trying to sort out whether the rally in the bond market is a perverse rally rather than a big vote of confidence" in Mr. Clinton's package, said John Blair, head equity trader at NatWest Securities. "The program is overly reliant on increased taxes," rather than spending cuts, he said, and doubt abounds about how much of the plan will actually be passed by Congress.

"All of these things are up in the air -- whether we're going to have enough spending cuts to equal higher taxes, and if the economy does slow down, will the Fed cut interest rates?" said Barry Berman, head trader at Robert W. Baird.

Advancing stocks exceeded declining issues by about 4-to-3 on the New York Stock Exchange. Trading was active, with more than 260 million shares changing hands.

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