Industrials top 3750 computer, utility, telephone stocks rally

WALL STREET

December 14, 1993|By Bloomberg Business News

NEW YORK -- The Dow Jones industrial average closed above 3750 for the first time, driven by rallies in International Business Machines Corp. and Minnesota Mining and Manufacturing Co.

Broader market indexes were mixed as rising gold prices fueled concern about inflation, lifting long-term interest rates. Computer-guided buy orders boosted share prices twice during the day, according to Laszlo Birinyi Associates.

"I don't think anyone loves [IBM] yet, or ever will again, but they have taken a lot of steps" to shore up the company, said Henry Otto, managing director at Brandywine Asset Management of Wilmington, Del. "They've let people go and cut their costs quite a bit, and they've shown they can do things correctly, which builds up momentum."

The Dow Jones industrial average jumped 23.76 to 3764.43, its fourth new high in the past week, led by 3M, IBM, Aluminum Co. of America and DuPont Co.

IBM surged $2 to $57.25, its highest since last December, after it agreed to sell its Federal Systems unit to Loral Corp. for $1.575 billion. "That does show it's not all junk; there are some valuable pieces in there," said Mr. Otto, whose firm manages $2 billion in assets.

In the broader market, the Standard & Poor's 500 Index rose 1.77 to 465.70, snapping a three-day losing streak as computer, chemical, semiconductor, telephone and utility stocks advanced.

The Nasdaq Combined Composite Index fell 1.03 to 759.72, its sixth straight loss, led by Microsoft Corp., Price/Costco Inc., Nordstrom Inc., Snapple Beverage Corp. and QVC Network Inc.

Almost nine stocks dropped for every eight that advanced on the New York Stock Exchange. On Nasdaq, 13 stocks fell for every nine that gained.

Volume on the Big Board was moderate, rising to 255.1 million shares from 244.6 million on Friday.

Gold futures, often used as a hedge against inflation, jumped $3.70 to $388.60 an ounce amid reports in the Washington Post that the Clinton administration wants the Federal Reserve to take a less aggressive stance against inflation. Gold also advanced on expectations U.S. economic growth might stimulate both investment and industrial demand.

Higher precious metals prices helped drive long-term interest rates, as reflected in the 30-year Treasury bond, to 6.23 percent from 6.19 percent on Friday. Higher interest rates make stocks less attractive relative to bonds, increase companies' financing costs and raise concern about the length of the economic recovery.

Unofficial election results from Russia also hurt stock prices early in the session, as opponents of President Boris N. Yeltsin won control of the newly elected parliament.

Reports of stronger consumer spending, higher corporate earnings and successful world trade talks forced yesterday's stock market gains, analysts said.

Progress in the latest round of talks in the General Agreement on Tariffs and Trade was "good for stocks abroad," as GATT success "is seen as a big boost for world trade," said Mr. Ackerman.

Domestically, "consumer confidence is likely to give the market another shot of adrenalin," he said.

While many investors are concerned about accelerating economic growth pushing up inflation, interest rates and precious metals prices, "energy prices remain stable, and that's a positive," said Richard Ciardullo, head trader at Eagle Asset Management in St. Petersburg, Fla., which manages $6 billion in assets.

West Texas Intermediate crude oil for delivery in January dropped 55 cents a barrel to $14.52 yesterday amid concern refiners weren't prepared to cut back production of heating oil and gasoline.

As a result, Texaco Inc. fell 50 cents to $63.875, Royal Dutch Petroleum fell 75 cents to $103.125 and Amoco Corp. dropped 37.5 cents to $52.25.

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