|
Double-record day for stocks
|
 |
July 1, 1999: 5:05 p.m. ET
Investors ignore strong NAPM, focus on expectations for good earnings
By Staff Writers Malina Poshtova Zang and Robert Scott Martin
|
NEW YORK (CNNfn) - U.S. stock markets ignored rising bond yields and news that the economy's strength remains intact Thursday, focusing instead on expectations for a robust second-quarter earnings season and extending Wall Street's rally into a second straight day, with record highs for the Nasdaq and the S&P 500.
The Dow Jones industrial average gained 95.62 to 11,066.42, closing above 11,000 for the first time since mid-May. On the New York Stock Exchange advances led declines 1,693 to 1,381 as a healthy 835 million shares traded.
The Nasdaq composite gained 20.08 points to 2,706.20, plowing its way to a record close. The S&P 500 index, also setting a record, rose 8.12 to 1,380.78.
The Federal Reserve on Wednesday raised the fed funds rate, a key short-term interest rate, by a quarter percentage point. But the Fed's policy-making committee shifted its bias back to neutral, indicating further rate hikes are unlikely in the near future. The bias decision gave rate-weary investors a surge of relief, pushing both stocks and bonds sharply higher.
However, news Thursday that manufacturing activity continued to grow at a blistering pace in June kept investors on their toes, sending bond yields higher. The National Association of Purchasing Management's index for June, a key indicator of manufacturing activity, jumped to 57 from 55.2 in May, well above market predictions.
Still, stock market players shook off an early stumble and concentrated on sectors that benefit from strong economic growth -- cyclical issues like manufacturing or transportation stocks. The broader market followed suit, although more timidly, amid expectations that second-quarter corporate earnings will bring mostly positive surprises.
Barry Hyman, senior equity strategist at Ehrenkratz, King, Nussbaum, said that the expected earnings growth of 13 to 15 percent in the second quarter for S&P 500 companies is likely to keep the market's upward momentum over the near term. (512K WAV) or (512K AIFF)
The bond market tumbled as soon as the NAPM figures were released, giving up all post-Fed gains and more as the bellwether 30-year Treasury bond dropped 17/32 of a point in price to yield 6.00 percent.
The dollar surged to a new lifetime high against the euro, but then edged off its highs amid market rumors that the Bank of Japan was eyeing currency exchange rates and may start buying euros to support the European currency. The dollar slipped against the yen.
Cyclical rotation
In the stock market, cyclical manufacturing and resource stocks, which thrive in conditions of robust economic growth, kept the broader market aloft after themselves getting a lift from the NAPM data.
Shares of Dow chemical firm DuPont (DD), which revealed 800 job cuts Thursday as part of its ongoing $2 billion restructuring plan, climbed 1-7/16 to 69-3/4. The company said it expects to start seeing profits from the restructuring in the fourth quarter.
Among other Dow cyclical components, Caterpillar (CAT) gained 1-3/16 to 61-3/16 and General Motors (GM) added 1-5/8 to 67-5/8 while Union Carbide (UK) climbed 3-9/16 to 52-5/16.
Transportation stocks joined in the rally. The sector also prospers as the economy grows, encouraging investors to buy into airlines and freight firms.
The Dow transportation index climbed 62.24 points, or 1.8 percent, to 3,466.78. US Airways (U) led the airlines, rising 2-7/16 to 46, while Airborne Freight (ABF) gained 1-1/16 to 28-3/4.
CNF Transportation (CNF) shares climbed 2 to 40-1/2.
Earnings season looms
Otherwise, investors seemed content to put their interest rate worries behind, at least for a while, focusing instead on the upcoming second-quarter corporate earnings reporting season.
As is usual just before the main flood of earnings spills into the market, Wall Street got a series of previews from companies warning of disappointing results or celebrating higher-than-anticipated profitability.
On the dark side, shares of specialty coffee chain Starbucks (SBUX) tumbled 10-5/8, or more than 28 percent, to 26-15/16 after the company said profit for fiscal 1999 ending in September would fall far below analysts' expectations. Goldman Sachs stripped the company of its "top pick" recommendation, while Deutsche Bank Alex. Brown cut its rating to "buy" from "strong buy."
On the positive side, S3 Inc. (SIII) climbed 2-5/32, or nearly 24 percent, to 11-1/4 after announcing it would earn 15 to 20 cents per share in the second quarter, while the market had expected a loss of 20 cents per share. S3 is a maker of high-performance multimedia accelerators, which help computers handle graphics and video.
Outside the trickle of profit news, Disney (DIS) shares tumbled 1-13/16 to 29 after Morgan Stanley Dean Witter analyst Rich Bilotti downgraded the Dow entertainment company's stock to "neutral" from "strong buy." Bilotti attributed the downgrade to perceived weakness in Disney's film and home video businesses.
Disney's fellow Dow member Coca-Cola (KO) had a better time with the analysts, earning an upgrade to "outperform" from "neutral" from Salomon Smith Barney, which agreed with the soft drink maker that "the worst is behind" it after a recent European health scare. Shares climbed 2-7/8 to 64-7/8.
(Click here for a look at today's list of CNNfn's market movers.)
(Click here for a look at today's CNNfn technology stocks report) 
|
|
|
|
|
 |
|
