Blue-chip stocks rallied to levels not seen since late July Monday, as investors marked up shares a day in advance of a key Federal Reserve policy-setting meeting on interest rates
The Dow Jones industrial average advanced 91.14 points, or 1.0 percent, to 9,010.73. It was the barometer's best close since July 30, when it finished at 9,026.95.Yet, the gains were narrow, with winners barely outnumbering losers on both New York Stock Exchange and Nasdaq Stock Market. Trading volume was thin given the uncertainty surrounding Tuesday's Fed meeting.
Most Wall Streeters believe the Fed's Federal Open Market Committee will trim the federal funds rate, the overnight rate on overnight loans between banks. Still, many investors harbor doubts about a rate cut Tuesday, given the U.S. market's surge since Oct. 8 and recent above-forecast economic reports. The committee cut the federal funds rate by one-quarter percent on Sept. 29 and Oct. 15.
Arthur Cashin of Paine Webber told CBS News Correspondent Anthony Mason that if the Fed decides to cut rates, Wall Street will respond favorably. "If Alan Greenspan says, 'Well, you know, I'm not gonna cut rates right here,' it says Alan Greenspan is pretty comfortable with the world markets. So things are pretty good anyway."
"A lot of people are just sitting on the sidelines today, but I wouldn't say people are nervous," said Bob Basel, head of listed trading at Salomon Smith Barney. "It's more a tone of uncertainty, or caution, going into [Tuesday's] Fed meeting."
Robert Dickey, managing director of technical research at Dain Rauscher Wessels, sees the market trading lower Tuesday regardless of whether an interest rate cut occurs.
"It's a buy-the-rumor, sell-the-fact [situation] on the rate news, with a bigger decline coming if there is no cut Tuesday," he said in a research brief. "It now appears that the market will not be able to maintain this [technically] overbought condition and continue to go higher, but will instead turn and dip over the next two weks.
"It got a little too easy for all of us here recently, and now we are due for a short-term shake-up." Looking out over the next couple of months, Dickey remains bullish.
In Monday's market indicators:
- The Standard & Poor's 500 Index rose 0.9 percent.
- New York Stock Exchange winners outnumbered losers by 8 to 7.
- On the Big Board floor, turnover rose 1 percent to 615 million shares. The recent average has been closer to 800 million.
- The Nasdaq Composite advanced 0.7 percent. Advancing issues trailed decliners by 57 shares in the Nasdaq Stock Market. Volume totaled 745 million shares.
- The Russell 2000 Index of small-company stocks gained 0.3 percent.
- The 30-year Treasury fell 22/32, to yield 5.297 percent.
- CalMat (CZM) advanced 3 7/16 to 30 5/8. Rival Vulcan Materials (VMC) will buy the producer of concrete, asphalt, and other construction materials for $760 million plus the assumption of $130 million in debt. Vulcan shares were ahead 2 7/16 to 125 1/8.
- Hewlett-Packard (HWP) picked up 1 1/4 to 66 1/2. After the close of activity, it said fiscal fourth-quarter operating net amounted to 79 cents a share, besting Wall Street estimates by a nickel. HP said it was adversely impacted by falling PC prices. It sees things improving in Europe, but isn't so ebullient on Japan.
- Toys R Us (TOY) rose 7/8 to 20 13/16. It met most Wall Street estimates with its third-quarter operating results of 8 cents a share.
- Tiffany (TIF) added 1/4 to 40 3/16. The retailer and distributor of jewelry earned 34 cents a share in the third quarter. Most analysts had expected as much.
- Building products retailer Lowes (LOW) appreciated 5/8 to 38 7/8. It netted 33 cents a share in the third quarter, 2 cents ahead of most estimates. Sales at outlets open a year or more swelled 4.4 percent.
- (LCOS) was ahead 8 5/8 to 59 5/8. Merrill Lynch analyst Jonathan Cohen lifted his rating of the Internet search engine and content provider to "near-term buy" from "accumulate" and hoisted his 12-to-18-month target price to $70 from $50.
- Cohen's comments fueled buying of other Internet issues. CMG Information Services gained 4 5/16 to 73 15/16, Infoseek 2 1/16 to 33 13/16, MindSpring Enterprises 2 3/4 to 55, eBay 3 11/16 to 127 5/8, CNET 7 5/16 to 57, EarthLink Network 2 7/8 to 51 3/4.
- Theglobe.com, last week's big initial public offering, fell 14 3/4, or 23 percent, to 48 3/4. Friday, it sold 3.1 million shares at an offering price of $9, with the shares opening at 87, rising as high as 97, and closing at 63 1/2 - a 606 percent move. The company assists people in developing their own Web site.
- Last week's other headlining IPO, EarthWeb, lost 4 3/4 to 62 1/4.
- AvTel Communications (AVCO) collapsed 20 1/2, or 66 percent, to 10 1/2. Thursday, the stock catapulted 28 3/4 to 31 on word it would launc a service featuring high-speed Internet access. Friday, AvTel quashed talk that the service would be released nationwide.
- Home furnishings retailer Pier One Imports (PIR) added 15/16 to 10 7/16 on a positive mention in the Nov. 16 issue of Barron's.
- Bellwether technology stocks pressed higher. On Tuesday, Intel said it sees healthier PC demand and guided analysts to raise their fourth-quarter revenue estimates. Last Wednesday, the Semiconductor Industry Association said it sees 9 percent industry growth in 1999. International Business Machines advanced 1 15/16 to 159 3/8, Intel 3 1/8 to 106 7/8, Sun Microsystems 2 11/16 to 62 13/16, Gateway 1 1/2 to 54 3/8, Motorola 3 to 58, and Lucent Technologies 1 3/8 to 85.