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Tech Stocks Push Nasdaq to Record High

Dow industrials gain 37.50, also setting a new mark. Yield on long bond closes above 7%.

May 28, 1997|From Times Wire Services

Big-name technology shares drove leading stock averages to new highs Tuesday, but the broad market struggled as long-term interest rates jumped back above 7%.

Despite the new records, declining issues outnumbered advancers by a narrow margin on the New York Stock Exchange. "There's nothing conclusive about today's trading except that tech stocks are the favorite investment again," said Joe Battipaglia, chief investment strategist at Gruntal & Co.

"I think it was a buyers' panic," said Morton Cohen, who runs Clarion Partners' hedge fund.

The Dow Jones industrial average erased an early 43-point skid and then flirted with the 7,400-mark, rising 37.50 points to 7,383.41 for its second straight record close.

The technology-heavy Nasdaq composite index, which returned to record territory on Friday after a four-month drought, broke above 1,400 for the first time, closing up 19.49 points at 1,409.21.

Several other broad-market indexes also closed at record highs for the second straight session, but analysts found the advance unimpressive, noting that there were more declining issues than advancers on the New York Stock Exchange.

Analysts said the rally in technology stocks was rooted in positive comments on Micron Technology by an influential analyst. Micron jumped 4 3/8 to 42 5/8. Merrill Lynch's Tom Kurlak, a longtime bull, said he expects Micron to earn even more in 1997 and '98 than he once thought.

The rally touched almost every sector of the technology group, from computer companies to chip stocks to networking firms. Even disk drive makers rebounded, recovering slightly from recent losses that were driven by fears that disk drive prices would drop further.

"People are coming to their senses. These things tend to get overdone. They get oversold and then they come back," said Brian Finnerty, senior vice president at Unterberg Harris. "Basically, inflation is slow. Earnings have been great. It's just a great environment for tech stocks."

Stocks started the day mostly lower as bond prices fell, boosting the yield on the 30-year Treasury bond above 7% for the first time since late April.

But the unsettling developments in the bond market failed to rattle stock investors emboldened by last week's Federal Reserve Board decision not to slow the economy with an increase in the central bank's lending rates.

When the long-bond yield last moved above 7%, investors were worried that the Fed would try to ease inflationary market demand with a series of rate hikes, potentially hurting company profits.

"The fact that the Fed issue is behind us has given everybody courage. But that may be a false sense of security," Battipaglia said.

Stocks also held up well despite a new report showing consumer confidence skyrocketed to a 28-year high in May. The data ran counter to other recent signs that economic activity may be slowing enough to keep inflationary pressures under control without another boost in interest rates.

Among market highlights:

* Among technology stocks, Intel jumped 6 1/8 to 169 5/16. 3Com rose 3 1/2 to 46 3/4 and Dell Computer rose 6 to 113 1/4.

* Bank stocks could not escape the weakness in the bond market. Citicorp fell 4 5/8 to 113 1/4, BankAmerica lost 3 1/2 to 114 1/8 and J.P. Morgan slid 1 3/8 to 103 3/8.

* United Dental Care skidded 8 to 16 1/2. The medical equipment maker said after the close of trading Friday that second-quarter earnings would fall "significantly" below estimates.

Overseas, Tokyo's Nikkei stock average fell 0.8%, Frankfurt's DAX index rose 0.5% and London's FTSE-100 rose 0.4%.

Coffee futures soared Tuesday as continuing worries about short supplies of high-quality arabica coffee beans threatened to push the market to 20-year highs, traders said.

At the Coffee, Sugar and Cocoa Exchange in New York, coffee for July delivery rose 17.45 cents a pound to close at 274.30 cents, just below the 20-year high of 280 cents a pound set by the expired May coffee contract two weeks ago.

Coffee prices have risen more than 150% since December as stockpiles in both consuming and producing countries hover near 20-year lows.

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