Wall Street lifted by strong profits, subdued inflation Dow jumps 149 points to 9,245 as it, other indexes set records

'Everybody was excited'

Economy

July 15, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

A flurry of good news sent stocks soaring yesterday as large companies surprised analysts with better than expected earnings and the government released a report indicating that inflation is under control.

The Dow Jones industrial average jumped 149.33 points, or 1.64 percent, to a record 9,245.54. It was the first record for the closely watched index of 30 blue-chip stocks in nine weeks. Its last record was May 13, when it closed at 9,211.84.

"It was a euphoric day," said Bob Freedman, chief investment officer at Boston-based John Hancock Funds, which manages $37 billion in assets. "What can I say, everybody was excited."

Other indexes shot to highs yesterday, too.

The Standard & Poor's 500 index, which tracks a broad basket of the country's biggest companies, closed up 12.39 points, or 1.06 percent, to a record 1,177.58. The Nasdaq composite index, where many technology and health care firms are traded, rose 2.88 points, or 0.15 percent, to 1,968.41 -- its fifth record in as many trading days.

The Wilshire 5,000 index climbed to its first close over 11,000. The Wilshire, which actually tracks 7,394 stocks across a spectrum of the New York Stock Exchange, American Stock Exchange and Nasdaq stock market, finished the day up 95.12 points at 11,024.40.

And the NYSE composite index gained 6.19 to a record 597.61.

Other broad indexes rose, but didn't set records. Among them, the Russell 2,000 index of small capitalization stocks inched up 0.68 to 459.43; the American Stock Exchange composite index gained 1.73 to 732.20; and the S&P 400 midcap index added 1.19 to 369.83, 21 points shy of its record close.

The Sun-Bloomberg Maryland index, which tracks the top 100 Maryland stocks by market valuation, gained 1.49 to 233.27, about 11 points below its high.

The market was fueled after companies either announced unexpectedly robust second-quarter earnings, or matched analysts' estimates.

New York-based J. P. Morgan & Co.'s stock soared $7.562 a share yesterday to $133.562 when its earnings smashed analysts' predictions by 6 cents a share.

Shares of drug maker Johnson & Johnson jumped $2.437 to $74.25 as second-quarter profit rose 11 percent, boosted by higher prescription drug sales.

GM up despite strikes

General Motors Corp. rose 75 cents to $69.625 after the No. 1 automaker reported that earnings fell less than some analysts expected, as strikes hobbled production.

And International Paper Co., North America's largest maker of paper and wood products, rose 68.75 cents a share to $43.5625 after second-quarter income beat estimates.

The market "had a nice run today," said Patrick Bradley, director of economic and investment research at Mercantile-Safe Deposit Trust Co. in Baltimore. "It looks like investors have put some of the earnings cautions far behind them."

The market received more welcome news when the government said consumer prices were up just 0.1 percent last month, less than analysts' forecast of 0.2 percent. The report reinforced the belief that inflation is under control and the economy is not overheating.

Another factor propelling stocks higher, experts said yesterday, is that Asian markets have remained stable in the face of sweeping political and economic changes in the Japan, the region's most important economy.

Construction boom

Problems with Asia are over, said Peter Canelo, U.S. investment strategist at Morgan Stanley Dean Witter in New York. He is so confident that those problems have been put to rest that he sees the Dow reaching 9,500 to 9,700 points by the end of summer.

"Everybody is worried about a slowdown," Canelo said.

"People seem to be forgetting that the most powerful sector of the economy is booming. This is the biggest housing and construction boom in American history."

He said consumers will continue fueling the economy by buying houses and spending to furnish them. Corporations are also playing their part by buying new equipment.

"The leading indicators, including housing, are scorching," Canelo said. "We are seeing business investment at a 13-year high the superlatives go on and on. The stock market is soaring because it is seeing a resurgence of growth."

Joseph V. Battipaglia, chief investment strategist at Gruntal & Co. LLC in New York, said investors have grown "numb" to bad news.

"We have heard just about all the bad news you can possibly hear out of Asia, and we have heard all of the bad news from earnings. In the absence of any worry, the market will move higher."

Battipaglia expects Dow 9,500 by year's end. He thinks investors should stick with the big-name stocks, and have faith that the market will continue to perform.

"Short-term momentum type strategies, that whole field has been littered with tremendous casualties," he said.

He favors automakers, including General Motors because it has a strong brand name; drug companies such as Merck & Co., Johnson & Johnson and Bristol-Myers Squibb Co.; and financials, such as First Union Corp.

Pub Date: 7/15/98

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