Stocks look bullish again

December 9, 1996: 5:16 p.m. ET

Investors settle down after panicking over Greenspan comments

NEW YORK (CNNfn) -- It may be irrational, according to the Federal Reserve chairman, but stocks resumed their exuberant climb Monday, erasing most of Friday's losses as investors regained that bullish look.
     The Dow Jones industrial average closed up 82.00 to 6,463.94. The index, like markets around the world, recovered from a heavy hit Friday, when it dropped 145 points before settling for a 55-point loss. Friday's fall was attributed to Federal Reserve Board Chairman Alan Greenspan, who warned against "irrational exuberance" in the markets -- his way of saying stocks currently may be overvalued.
     Many investors believed that was a signal he might raise interest rates to slow things down, economically speaking.
     But a benign unemployment report soothed Wall Street and the buying resumed.
     Still, David Katz, chief investment officer for Matrix Asset Advisors, agreed with Greenspan and said the markets were due for 10 to 15 percent pullback.
     "If you want to be in the stock market, we would take money out of the best performing stocks -- the stocks that are selling at 20 and 30 times earnings, that are really just up on momentum -- and move it to stocks that have performed less well but are good companies at reasonable valuations," he said.
     On the New York Stock Exchange, advances drowned declines, by more than 3 to 1, on light volume of 385 million shares.
     In the broader markets, the Nasdaq Composite bolted into record territory, rising 28.59 points to 1,316.27, while the S&P 500 gained 10.16 points to 749.76, and the American Stock Exchange rose 4.78 points to 590.48.
     The Treasury's benchmark 30-year bond helped fuel stocks. The long bond rose 19/32 in price mostly from overseas buying, particularly in Japan. It yield fell to 6.46 percent.
     Technology issues made confident moves. Micron Technology (MU) added 1-1/8 to 35-1/8, while Cypress Semiconductor (CY) climbed 3/8 to 15-9/16, and Compaq Computer (CPQ) rose 1-1/2 to 85-3/4. IBM (IBM) gained 4-3/8 to 160.
     Microsoft (MSFT) added 5-1/4 to 81-3/4 after unveiling a version of its Web browser that can be used on computer systems running Windows 3.1. Separately, a stock split Microsoft authorized earlier in the year went into effect Monday.
     Shares in Monsanto (MTC) fell 3/4 to 40-1/2 after the company announced plans to split its chemical and agricultural units into separate publicly-traded companies. Monsanto will also cut 2,500 jobs.
     Philip Morris (MO) remained one of the hottest Dow components. The company added to 4-7/8 to 114-1/4. Analysts say investors have returned to the stock as tobacco litigation fears have been mitigated.
     On the merger front, an announcement that gold producer Homestake Mining will acquire Santa Fe Pacific Gold for $2.3 billion, or $17.40 per share, continued to move the sector. The deal followed Santa Fe's decision to reject an unsolicited bid from rival Newmont Mining. Shares in Santa Fe Pacific Gold (GLD) rose 1-1/8 to 16-1/2, but Homestake (HM) shed 7/8 to 14-3/4. Newmont (NEM) lost 1/8 to 47.