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Dow nears all-time high
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October 7, 1997: 5:20 p.m. ET
Another day for record books as blue chips, broader markets, bonds surge
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NEW YORK (CNNfn) - Call it the carbon copy market.
In a performance that mimicked Monday's record session, stocks vaulted higher Tuesday amid optimism over corporate earnings and a continued rally in the bond market.
The Dow Jones industrial average closed up 78.09 points at 8,178.31, less than 100 points off the all-time high it reached on Aug. 6.
Blue chips and broader market leapt as word reached the trading floors that respected Goldman Sachs strategist Abby Joseph Cohen called for the stock market to roar higher. Cohen said low interest rates, minuscule inflation and steady corporate profits were the perfect ingredients for an extended bull market.
Those comments teamed up with remarks by Morgan Stanley strategist Barton Biggs that the yield on the 30-year Treasury -- reaching a 20-month low at 6.24 percent Tuesday -- could fall to 5.5 percent. That pushed more money into stocks and drove six leading stock indexes to all-time highs.
At the close, the record setters included: the S&P 500 index, rising 10.43 to 983.12; the Nasdaq Composite, climbing 15.36 to 1,737.27; the American Stock Exchange index, up 5.10 to 721.90; the New York Stock Exchange Composite, gaining 4.51 to 514.21; the Dow Transportation average, rising 31.25 to 3,281.20; and the Russell 2000 index of small stocks, posting a 2.08 gain to 463.78.
"I'm pessimistically optimistic because the way I'm looking at it is we're in a trading range," said Todd Eberhard of Eberhard Investment. "I'm looking at about 7,650 to about 8,300 on the Dow…. We're a little higher today, but I think we're coming towards the top end of that trading range."
Vincent Farrell, chief investment officer at Spears, Benzak, Salomon & Farrell, added that "you have some third-quarter earnings coming out that might be pretty good with great visibility, you might see a little bit of move back toward the large caps. With Motorola being an indicator, you're going to get predictable, solid earnings out of the large caps, and that might attract some money in here."
Looking at key issues, blue-chip gainers ranged from 3M (MMM), up 2-7/8 to 8-7/8, to Walt Disney (DIS), up 2-3/16 to 85-3/16, to General Electric, up 2-1/8 to 72.
Elsewhere, Motorola (MOT) rolled ahead 2-3/16 to 73-3/16 one day after more than matching estimates with a 29 percent jump in quarterly profits. The chip maker cautioned that sales could slow in the fourth quarter and added that it might eliminate unproductive operations.
Rivals of Motorola also pulled higher on the positive report and expectations of additional pleasant surprises. Texas Instruments (TXN) gained 2-7/16 to 132-7/8 and Advanced Micro Devices (AMD) climbed 1-5/16 to 30. Intel (INTC) rose 1-3/4 to 95-1/4.
Shares of Sun Microsystems (SUNW) shed 1/8 to 46-7/16 as traders tried to figure out the implications of a lawsuit the company brought against Microsoft over the use of Sun's Java programming language. Sun alleges patent infringement, breach of contract and false advertising on the part of its larger rival. Microsoft (MSFT) climbed 1-3/8 to 136-1/2.
Among other active issues, FileNet (FILE) rose 1-5/8 to 24-1/2 after the document management firm told Wall Street it expects third-quarter earning to surpass forecasts, while McAfee Associates (MCAF), which makes anti-virus software for computers, gained 3-7/8 to 63-3/4 on a statement that it will beat expectations.
Reader's Digest (RDA) fell 2-15/16 to 28-1/8 following a warning that quarterly results will not come near estimates. Analysts had predicted a profit of 15 cents per share. The company lowered that to a loss of as much as 10 cents a share.
Besides earnings, investors found time to snack on PepsiCo's spin-off of its restaurant chains into a company called Tricon. The new company includes Taco Bell, Pizza Hut and Kentucky Fried Chicken. Shares of Tricon (YUM) slipped 7/8 to 31-1/8 and PepsiCo (PEP) climbed 1-13/16 to 38-3/4.
Cisco Systems (CSCO) gained 2-1/8 to 81-11/16 on upgrades from Oppenheimer and UBS Securities. Analysts say the stock could trade as high as $95 a share.
But shares of the online stock trading service E*Trade Group (EGRP) dropped 5-5/16 to 34. The firm announced plans to build a financial services Web site with Banc One, but investors were more concerned that rival firms will slice commissions for online stock transactions.
-- David Rynecki
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