Bonds, technology stocks give stock market a lift

The Ticker

August 11, 1994|By Julius Westheimer

A rally in technology stocks and recovering bond prices lifted the stock market yesterday, despite strong hints from Federal Reserve Chairman Alan Greenspan that higher interest rates are on the way. The Dow Jones industrial average climbed 11.0 points, to 3,766.76, its third straight gain.

Speaking of stocks, many readers have asked to see a recent quality ranking of electric utility stocks. In that connection we print today up-to-date data from Argus Research Corp., based on capitalization ratios, quality of earnings, capital spending plans and operating performance of each company. If you have questions about your individual utility holdings, see your broker.

Group 1 -- High Quality: Allegheny Power, Consolidated Edison, Dominion Resources, Duke Power, Oklahoma Gas & Electric, Pennsylvania Power & Light, Potomac Electric Power, San Diego Gas & Electric, SCANA Corp., TECO Energy and Wisconsin Energy.

Group 2 -- Good-to-High Quality: American Electric Power, Baltimore Gas & Electric, Boston Edison, Central & Southwest, DPL Inc., DQE Inc., Florida Progress, FPL Group, Northern States Power, Pacific Gas & Electric, PacifiCorp., SCE Corp. and Union Electric.

Group 3 -- Good Quality: Delmarva Power & Light, Carolina Power & Light, Detroit Edison, Entergy, Houston Industries, New England Electric, Northeast Utilities, PECO Energy, Public Service Enterprise Group, Centerior Energy, Cincinnati G.& E., General Public Utilities, N.Y. State Electric & Gas, NIPSCO, Ohio Edison, PSI Resources, Public Service of Colorado and Southern Co.

Group 4 -- Medium Quality: CMS Energy, Commonwealth Edison, Illanova Corp., Long Island Lighting, Niagara Mohawk, Pinnacle West Capital and Texas Utilities.

Speaking of utility stocks, Mark D. Luftig at Kemper Securities, recently voted Wall Street's No. 1 utility analyst, said on "Wall Street Week With Louis Rukeyser" that he feels utility stocks have hit bottom and should be bought at this level, certainly not sold. He suggested buying PECO, Entergy, General Public Utilities, TECO, CMS and Tucson Electric. He was bearish on Texas Utilities and Idaho Power.

GOOD NEWS: "It's the 'Year of the Dividend,' and they're taking big leaps: McDonald's up 12 percent, Barnett Banks 14, Nordstrom 18, The Gap 20, Chrysler 25. Or how about Capital Cities/ABC, dividend up 900 percent? Many companies aren't just increasing dividends by minimal amounts to prolong streaks. They're boosting them enough to matter. The above increases typify what is destined to be the best year for dividend increases since 1983. There's not much mystery to this. Profits are humming, and with short-term interest rates up, companies cannot let their dividend yields languish. If profits continue upward, expect strong dividend gains next year as well." (Kiplinger's Personal Finance Magazine, August)

LOOKING AHEAD: Of all the stock market comment that I read over the past 10 days, 70 percent was gloomy. Samples of both sides: "A decline to normal historic valuations would result in a 40 percent stock decline." (Investor Strategy and Tactics) . . . "Despite relatively mild setbacks, we will see new all-time highs on the Dow in 1994, and an even greater gain in 1995." (The Prudent Speculator) . . . "The most dangerous thing about today's market is the public's complacency. Like lemmings about to drown, the public seems to be totally unaware of the great decline that's coming." (Granville Market Letter) . . . "The long-term trend trend remains clearly negative." (Professional Tape Reader.)

Ticker Comment: Before the major market plunge of 1973-1974 (Dow Jones average from 1,011 to 577), 80 percent of comment was optimistic. Conversely, before the major rally of the 1980s, most opinion was bearish.

HOPEFULLY HELPFUL: A recent "Dollar Stretching Ideas" runs a good story, "Arbitration: Better Than Confrontation." Excerpts: "If your car is a lemon, and you spend sleepless nights thinking how to get even with the dealer, the idea of calm, rational negotiation may not appeal to you. But working out your disputes is a better way to get what you want than getting angry. All major car-makers participate in arbitration, an informal and efficient way for both parties to reach agreement. In arbitration, you present your case to an independent board, but the burden of proof is on you. Key points about arbitration: (1) Know what arbitration can and cannot do. (2) Present a rational, well-documented case. (3) Say clearly what you want -- a new car, repayment for expenses, etc. -- not just wild statements like, 'I demand justice!' "

LAST LINES: "For savers, bond investors and mortgage borrowers, the rest of 1994 will be calmer. The Fed will undoubtedly raise short-term rates again, but long rates will stay about the same." (Kiplinger's Personal Finance Magazine, Sept.) . . "Employers are finding more ways to watch workers. Some use cameras, some eavesdrop on phones, some read E-mail. One survey showed that 80 percent of U.S. workers in telecommunications, insurance and banking are subject to telephone or computer-based monitoring." (U.S. News & World Report)

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