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MARKET SAVVY

Nasdaq, S&P Set Highs as Broad Rally Continues

July 02, 1999| From Times Wire Services

Stocks vaulted higher Thursday, with the Nasdaq composite and Standard & Poor's 500 indexes setting records as investors reveled in the new interest rate environment.

The Dow Jones industrial average rose 95.62 points to close at 11,066.42. The blue-chip index held steadily above 11,000 for the first time in weeks, and during the session inched within 28 points of its May 13 record close of 11,107.19. This week, the Dow has gained 513.86 points.

A resurgence in technology stocks boosted the Nasdaq composite 20.06 points to 2,706.18, topping the record it set Wednesday. The S&P 500 index rose 8.25 points to 1,380.96, also beating its Wednesday record.

Once again, investors applauded the long-expected decision by the Federal Reserve to raise short-term interest rates one-quarter percentage point. The market was heartened by the Fed's policy shift to a "neutral" bias on the need for future rate increases.

"[Chairman Alan] Greenspan, by removing his bias to tighten, has flashed a red cape in front of the bull market," said William Meehan, chief market analyst for Cantor Fitzgerald.

Steve Shobin, a technical analyst with Lehman Bros., said he might have expected profit-taking to set in after three consecutive days of steep gains.

"It's really a sign of great strength that this market continues to be able to reach new levels," he said.

Bonds initially plunged, as a manufacturing report suggested the threats of inflation that first prompted the Federal Reserve to raise interest rates may not have evaporated. Prices recovered, and the yield on the 30-year Treasury bond settled at 6.00%, up from 5.97% the day before.

Advancing issues outnumbered decliners by 11 to 9 on the New York Stock Exchange, where volume was down from the previous session.

In currency trading, the euro dropped to its weakest level against the dollar since the January debut of the 11-nation single currency on expectations that European economic growth will lag that of the U.S. in coming months. The euro, down 12.2% this year, fell to $1.023, down 1.1 cents from the day before.

The NYSE composite index rose 3.20 points to 651.33, but the Russell 2,000 index of smaller companies fell 3.26 points to 454.42.

Among the highlights:

* Pharmaceutical makers rose, benefiting from President Clinton's plan to help elderly and disabled people pay for prescription drugs. Pfizer added $1.06 to $37.38, Merck gained $1.63 to $75.25 and Schering-Plough advanced $1.44 to $53.94.

* Semiconductor stocks such as Intel, up $3.38 to $62.88, led tech stocks higher.

* Among initial public offerings, Berkeley-based Ask Jeeves, which operates an Internet search service that answers 1 million customer questions a day, soared $50.94 to $64.94. The 364% rise was the third-biggest for a U.S. stock debut.

Walnut Creek, Calif.-based e-commerce specialist Commerce One jumped 190%, rising $40 to $61, while Redwood City, Calif.-based software company Clarent gained 70%, or $10.50, to $25.50.

Camarillo-based Salem Communications, which operates religion-oriented radio stations, climbed 13%, up $3 to $25.50.

* Pasadena's GoTo.com soared $8.50 to $36.50, giving it a gain of 75% since Monday on optimism that the number of visitors to the Internet search service will continue rising.

Overseas, Japan's Nikkei average rose 1.9% to its highest close since September 1997. European indexes also gained strength from the U.S. rate decision. Germany's DAX index rallied 1.9% and Britain's FTSE-100 rose 2.7%.

Market Roundup, C8

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