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Stocks surge in rate relief
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June 25, 1999: 11:36 a.m. ET
Easing bond yields tempt investors to pick up oversold Wall St. bargains
By Staff Writers Malina Poshtova Zang and Robert Scott Martin
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NEW YORK (CNNfn) - Wall Street followed the bond market's lead again Friday, with both blue chips and technology shares rebounding in relief after a downturn in bond yields soothed investors' worst interest-rate fears.
A report showing that gross domestic product grew at an annualized rate of 4.3 percent in the first quarter, although slightly above expectations, seemed to stir few jitters in the market. Wall Street has been on an interest rate watch for weeks, as data have showed strong growth and a possible slight pickup in inflationary pressures.
The Federal Reserve is holding a two-day policy meeting Tuesday and Wednesday and is widely expected to raise its key short-term rate, the Fed funds rate, at least a quarter of a percentage point.
Shortly before 11:30 a.m. ET the Dow Jones industrial average jumped 96.57 points to 10,631.40, nearly erasing its losses from Thursday. On the New York Stock Exchange, advances leaped ahead of declines 1,485 to 1,063 as 202 million shares changed hands.
The Nasdaq Composite rose 28 points, or nearly 1.1 percent, to 2,581.99 and the S&P 500 index was up 10.89 to 1,326.67.
The bond market edged higher, boosted largely by bargain picking after a week of falling prices and rising yields. The benchmark 30-year Treasury bond rose 1/4 of a point in price, for a yield of 6.13 percent.
The dollar eased against both the yen and the euro.
Rate relief
In the stock market, investors kept in mind the possibility of higher interest rates ahead and watched the latest earnings pre-announcements ahead of the second-quarter corporate bottom line reporting season.
However, the bond market's bounce lent stocks hope that upcoming Fed rate policy won't be as aggressive as some investors had feared. As a result, bargain hunters gorged themselves on rate-sensitive financial and technology stocks that looked undervalued in the likelihood of only one minor rate hike for the time being.
Among the Dow's financial components, shares of American Express (AXP) jumped 2-13/16 to 122-13/16, while J.P. Morgan (JPM) gained 1-1/2 to 129 and Citigroup (C) edged up 1-1/16 to 44-1/2.
In the likewise rate-wary technology sector, Microsoft (MSFT) shares gained 1-11/16 to 86-5/16 after courtroom deliberations in the government's antitrust lawsuit against the software giant ended Thursday.
Cisco Systems (CSCO) climbed 1-1/4 to 61-1/2 and chip heavyweight Intel (INTC) rose 1-1/16 to 56-1/8. On the Dow, IBM (IBM) gained 2-7/16 to 125 and Hewlett Packard (HWP) added 15/16 to 91-13/16.
Meanwhile, some manufacturing and resource shares got a lift from the GDP's confirmation that the U.S. economy remains dynamically expansive, a condition that naturally favors these cyclic sectors. Dow aluminum producer Alcoa (AA) surged 1-3/4 to 62-1/8 after being singled out for praise by Merrill Lynch, which raised its earnings forecasts on the company and lifted the stock's price target to $75 from $65.
Warnings and deals
On the earnings front, shares of Campbell Soup (CPB), the world's largest soup maker, lost 15/16 to 41-1/2 after the company said fiscal fourth-quarter profit per share would fall as much as 10 cents below the 38 cents Wall Street had bet on. Campbell also announced the launch of a global restructuring program, aimed at streamlining costs.
Also making news Friday, shares of aerospace powerhouse Lockheed Martin (LMT) jumped 1-5/16 to 36-1/2 after the Wall Street Journal reported the company is looking to sell as much as $1 billion of its assets and was searching for a strategic telecommunications partner as part of a strategic review of its operations.
Finally, in the day's news of failed deals, shares of drug developer Parexel (PRXL) tumbled 4-1/8 to 12-13/16, a loss of nearly 25 percent, after the company and would-be partner Covance (CVD), another drug development firm, called off their $800 million merger, citing the interest of shareholders. Covance shares gained 4-1/8, or more than 19 percent, to 25-11/16
Parexel's stock plunged 21 percent Thursday amid speculation in the market that the planned corporate union was in trouble. 
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