Dow leaps 225 points, to 11,014

Milestone is reached just 5 weeks after 10,000 was crossed

`It is a new bull market'

Investors buying cyclical issues as Nasdaq's tech stars dim

May 04, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

The Dow Jones industrial average, which had cracked 10,000 points only five weeks ago, zipped past 11,000 yesterday for the first time ever.

The closely watched Dow, a bellwether index of 30 blue-chip stocks, soared 225.65 points, or 2.09 percent, to close at 11,014.69.

The index, which sped from 10,000 past 11,000 in just 25 trading days, has climbed 11 percent in six weeks and nearly 20 percent this year.

"It's not the same market today as it was five weeks ago," said Ralph Acampora, chief technical analyst at Prudential Securities Inc. in New York. "It is very, very exciting. It is a new bull market. It is almost hard to believe."

Until recently, the market has been driven higher by a relatively small group of stocks, mainly well-known technology companies. But the surge over the past few weeks has been fueled by cyclical companies, such as General Motors Corp. and Minnesota Mining and Manufacturing Co., both of which had big gains yesterday, as well as small companies, while the technology sector has been taking a beating.

"What you have driving the market is basic Americana," said Alfred Goldman, chief market strategist at St. Louis-based A. G. Edward & Sons Inc. "These are not the growth companies of America, these are rust-bucket companies that do well if the economy does well."

The stock market is "like driving that brand new car out of the showroom," said Acampora. "This thing doesn't even have a nick on it. We have all new leaders here."

Besides the Dow, the Standard & Poor's 500 stock index rose 19.45 points, or 1.46 percent, to 1,354.63. But the Nasdaq composite index, dominated by computer and Internet stocks, slipped 7.27 points to 2,535.58.

Two stocks rose for every stock that fell on the New York Stock Exchange and 226 companies hit 52-week highs on all U.S. exchanges, twice those that fell to one-year lows.

Advancing issues outnumbered decliners by a 2-to-1 margin on the NYSE, where about 811.5 million shares changed hands.

Richard Cripps, chief market strategist at Baltimore-based Legg Mason Inc., said stocks are being driven higher by low inflation, low interest rates and the overall robust economy.

"Most important, investors are very confident that they are going to have positive returns in equities," he said.

As more stocks rise, the market becomes healthier, Cripps said.

"Typically a market that broadens out is a good omen for further price gains, which is what you have developing right now. Investors are afraid to sell and afraid to be out of the market and they now have confidence that they can go into a wide spectrum of stocks."

But investors should brace for a drop in the market after such a strong run, Cripps said.

"We are due for some sort of correction," he said. "Things look good, no question about it, but I would be a little bit restrained about being a buyer and certainly hold what you already own."

Acampora, who had predicted that the Dow would roll past 11,500 this year, is prepared for the benchmark to fall quickly the way the market is moving.

"We will probably do that in a few days," he said with a laugh.

Elsewhere on the broad market yesterday, the American Stock Exchange composite index advanced 9.70 to a record 786.67, and the S&P 400 midcap index added 6.24 to 400.83, also a record. The Russell 2,000 index, a benchmark of small-cap stocks, rose 0.47 to 433.28; the Wilshire 5,000 index jumped 127.27 to 12,386.63;

The Sun-Bloomberg Maryland index of the top 100 Maryland stocks gained 4.36 to 188.58.

Cyclical stocks, whose fortunes are most closely tied to economic ups and downs, led the Dow industrials' rise. General Motors rose $4.6875 to $93.75; Minnesota Mining and Manufacturing gained $4.875 to $93.875; and United Technologies Corp. climbed $3.6875 to $148.375. Goodyear Tire & Rubber Co., one of the worst performers in the index in the past year, advanced $3.5625 to $60.75.

Microsoft Corp. pulled the Nasdaq lower on concern that testimony from an International Business Machines Corp. executive will bolster the government's antitrust case against the biggest software maker.

Microsoft fell $1.4375 to $79.875. An IBM executive may testify for the Justice Department against Microsoft when the government antitrust trial resumes this month, people familiar with the trial said.

A slump in Internet shares also weighed on the Nasdaq.

Amazon.com Inc. tumbled $21.125 to $150.9375 after a Barron's writer said the largest Internet retailer's shares are worth $25 at most.

Yahoo! Inc. fell $12.125 to $162.5625.

America Online Inc. dropped $9.75 to $133, on the NYSE.

Bloomberg News contributed to this article.

Pub Date: 5/04/99

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