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Smaller Stocks Lead Market's Advance

October 22, 1998|From Times Staff and Wire Reports

U.S. stocks rose for a sixth straight session on Wednesday, with technology stocks and smaller shares leading the way.

The Russell 2,000 index of smaller stocks rose 0.5% to 359.94, its highest level since Sept. 30, as winners topped losers by 22 to 17 on the Nasdaq stock market, home to most smaller issues.

The Dow Jones industrial average, by contrast, edged up 13.38 points, or 0.2%, to 8,519.23--its best finish since Aug. 26.

The Nasdaq composite index, stoked by another round of heady gains for leading tech shares, surged 2.2% to 1,674.75.

Although the Dow's advance has waned in recent days, the six-day winning streak is the longest since February.

Buoyed by some stronger-than-expected third-quarter corporate earnings reports--especially in the technology sector--investor confidence is returning after the horrendous late-summer market rout, analysts note.

More than half the companies in the Standard & Poor's 500 index that have reported quarterly results so far have beaten analysts' expectations, despite a slower economy in the third quarter.

"Earnings are coming in reasonably well," said Tim Stevenson, a money manager with First Union's Capital Management Group, which oversees $50 billion.

Some healthy tech earnings reports from companies such as Intel, EMC, IBM and Microsoft have helped power stocks in recent days.

Confidence has rebounded enough to drive some bargain hunters into the beaten-down small-stock sector. The Russell 2,000 index, after plunging 37% between late-April and Oct. 8, has gained 16% since then.

Many analysts are wary about the bounce, fearing that it could be a trap--and that stocks' selloff could quickly resume.

Still, the Federal Reserve Board, in cutting short-term interest rates twice since Sept. 29, has demonstrated its resolve to keep the U.S. economy out of recession in 1999, analysts note.

Global recession worries had been the biggest monkey on stocks' back in late-September.

"The Fed seems to be committed to preventing a recession," said Glenn Baker, who helps oversee $29 billion of bonds at Brown Brothers Harriman & Co.

But Joseph Balestrino, senior vice president and senior portfolio manager at Pittsburgh-based Federated Research Corp., said one danger, especially for stocks, is the now widely held belief that the Fed will cut interest rates a third time when it meets Nov. 17.

If that cut doesn't happen, the market could be socked, some experts fear.

In the bond market on Wednesday yields were little changed. The yield on the 30-year bond held steady at 5.07%.

Foreign stock markets were mixed, with Tokyo showing renewed strength, up 3% to 14,216. Brazil's battered market also was strong, up 5.4%.

Among U.S. market highlights:

* IBM led the Dow higher, gaining $4.81 to a record $142.69. But weakness in American Express, down $2.63 to $87.06, and Dupont, down $2.19 to $62, weighed on the Dow. Also, 3M fell $2.25 to $84.25. It is expected to report lower earnings today.

* Telecom stocks followed tech shares higher, with Lucent up $4.19 to $79, Tellabs up $3.13 to $49.75 and MediaOne up $2.25 to $42.75.

* Gainers among smaller stocks included Smart & Final, up 69 cents to $9.38; K-Swiss, up $1.75 to $24.25; and Kaynar Technologies, up $3.19 to $12.44 after hiring an advisor to boost shareholder value.

* On the downside, PeopleSoft, the No. 2 maker of business-management software, tumbled $6 to $19.75 after forecasting that sales will slow next year because of economic turmoil and competition.

And Washington Mutual fell $3.19 to $38.06 on the heels of its quarterly earnings report.

Market Roundup, C7

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