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Steady rates spark Dow
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July 2, 1997: 4:54 p.m. ET
No news is good news for blue chips and the broader markets
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NEW YORK (CNNfn) -- Wall Street stocks pushed to record levels Wednesday in reaction to the Federal Reserve's anticlimactic decision to leave interest rates unchanged.
The Dow Jones industrial average, trading in a tight, often uncertain pattern for the better part of the session, turned higher on the Fed's announcement. It ended up 73.05 points at 7,795.38, barely below an all-time high.
Mimicking the Dow, broader market indexes moved to record highs. The S&P 500 rose 13.01 to an all-time high at 904.04, followed by the record-setting Nasdaq Composite, which gained 17.37 to 1,455.62. The Dow Transportation index also closed at a record by adding 43.00 to 2,787.86.
In New York Stock Exchange trading, advancing issues outnumbered declines by 1,843 to 973. Volume topped 531.4 million shares.
But while stocks closed on the positive side, traders gave what was generally described as a lackluster reaction to an announcement that was largely anticipated. Most players saw little reason for an enthusiastic response, particularly with attention switching to Thursday's release of monthly employment statistics.
Bonds provided some support for stocks before and after the announcement. A Commerce Department report that factory orders in May fell by 0.7 percent, a slightly sharper pace than had been expected, began a mini-rally in the morning that held its position through the day. The benchmark 30-year Treasury bond gained 12/32 in price, with the yield sliding to 6.71 percent.
"The [economic] numbers are very benign. The economy in fact seems to be slowing a little bit. I know it's hard to read this week-to-week, month-to-month. But it does appear that it's slowing," said Jack Baker, head of trading at Furman Selz.
Hardly an analyst or economist in sight was looking for a rate hike. Even inflation hawks have admitted that inflation is at a minimum. Indeed, talk these days is of a "Goldilocks scenario" -- low inflation, strong growth and big earnings. David Jones, the chief economist at Aubrey G. Lanston, compared current financial conditions to the early 1960s era of high returns and few financial concerns. "I thing the markets are sensing something more profound, this perfect world story," he said. "The Fed action confirmed this view."
Looking at noteworthy issues, Staples (SPLS) dropped 29/32 to 23-13/32 and Office Depot (ODP) rose 1/2 to 16-1/8 after the companies terminated their $4.6 billion merger. A federal judge on Monday issued an injunction on the deal at the request of anti-trust regulators. Few analysts were surprised by the announcement.
Ascend Communications (ASND) jumped 5-5/16 to 49-1/16 on positive comments from Merrill Lynch. A Merrill analyst boosted the stock to "accumulate" from "neutral," creating positive ripples throughout the networking sector. 3Com (COMS) climbed 3-11/16 to 48-1/8 while Cisco Systems (CSCO) gained 2-1/4 to 70-9/16 and Cabletron (CS) rose 1-7/8 to 30-1/4.
Among other leading issues, CompUSA (CPU) climbed 2-11/16 to 23-15/16 on a 9.7 percent rise in same-store sales, but Nike (NKE) shares lost 5/8 to 57-3/8 one day after reporting fourth-quarter earnings of 52 cents a share.
Pennzoil (PZL) also lost 15/16 to 74-7/16. The company urged shareholders to reject the $4.2 billion takeover bid from Union Pacific Resources Group Inc., calling it "inadequate." Still, investors and analysts have said the 41 percent premium offered is quite rich.
Rockwell International (ROK) slipped 7/16 to 57-9/16 on word that Chief Executive Don Beall will retire. Beall led the aerospace conglomerate through a decade-long restructuring.
Armstrong World Industries (ACK), a maker of home-building products, said it expects second-quarter profits to fall below the estimated range of $1.55 to $1.66 a share. The stock lost 1 to 73-1/2.
And investors plucked Boston Chicken (BOST). Shares fell 1-1/8 to 13-3/8 as analysts continued to downgrade the stock, which is now 65 percent below its 52-week high. Complaints in the market are that Boston Chicken expanded too rapidly.
-- David Rynecki and Robert Liu
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