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FINANCIAL MARKETS

Dow, S & P Soar to New Highs; Smaller Stocks Lag Blue Chips

November 24, 1998|From Times Wire Services

The Dow surged to a new high Monday, capping a nearly 2,000-point rebound from the summer's steep slide, as merger fever returned to the stock market.

Extending a nearly nonstop rally that began less than two months ago, the Dow Jones industrial average rose 214.72 points to 9,374.27, topping the July 17 record of 9,337.97.

The Standard & Poor's 500 index also set its first record since July. But most broad-market indexes remained shy of new highs as smaller-company stocks continued to lag the blue chips that dominate the Dow and S&P 500.

The rally came as a series of billion-dollar takeovers and negotiations for two blockbuster deals signaled a return to the merger frenzy that energized the market in the spring and early summer.

U.S. bond prices fell for the first time in four days as stocks soared and Merck & Co. sold $500 million of long-term debt, drawing demand from safer government securities. The yield on the benchmark 30-year Treasury bond rose to 5.25%, from 5.22% on Friday.

The dollar rose against other major currencies, fetching 120.99 yen, up from 120.30.

Financial shares rallied as Germany's Deutsche Bank said it is discussing the final details of a $9-billion deal to take over Bankers Trust. And Internet shares led the technology group higher as America Online said it might buy Netscape Communications in a $4-billion deal.

The return to record terrain follows a volatile four-month journey that took the Dow as low as 7,400 on Sept. 1 and to 7,467 on Oct. 8, the day the market's recovery began.

But the rebound has been so steady--the Dow hasn't fallen as much as 100 points since Oct. 1--that many analysts are growing fearful of another sharp sell-off.

"We've got a mania for stocks right now, and you can't really make a rational explanation for what we have witnessed over the last six weeks," said Richard A. Dickson, a technical analyst at Scott & Stringfellow in Richmond, Va., noting that economic and financial instability overseas still pose a big risk.

The S&P--a broader blue-chip gauge than the Dow--rose 24.66 points to 1,188.21, topping its July 17 mark of 1,186.75. The Nasdaq composite index, dominated by big technology stocks and smaller companies, rose 49.21 points to 1,977.42 but remains about 37 points from its July 20 peak at 2,014.25. The Russell 2,000 index of smaller companies rose 3.86 points to 398.15.

Advancing issues outnumbered decliners by a 3-2 margin on the NYSE, while Nasdaq gainers led by an 8-7 ratio. Volume of all NYSE-listed shares totaled 950.33 million, up from 872.18 million on Friday.

Among Monday's highlights:

* The big gainers reflected the day's merger announcements and related speculation: Among the Dow's financial and technology components, IBM rose $6.44 to $166.56, J.P. Morgan rose $6.25 to $115.88, American Express rose $4.38 to $108.94, Hewlett-Packard rose $3.81 to $61.63 and Citigroup rose $3.94 to $49.

* Bankers Trust surged $7 to $84.25 on the takeover report.

* In the Internet group, Netscape rose $2.75 to $41.94, Yahoo rose $30.44 to $221.44, Amazon.com rose $37.38 to $218 and AOL rose $4.38 to $89.25.

Overseas, Germany's DAX index rose 2.2%, Britain's FTSE-100 rose 2.3% and France's CAC-40 rose 1.1%. Japanese markets were closed for a holiday.

Market Roundup, C12

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