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Wall St. hits triple record
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February 25, 1998: 5:33 p.m. ET
Greenspan's words send Dow, Nasdaq and S&P 500 to new all-time highs
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NEW YORK (CNNfn) - Alan Greenspan worked his magic once again Wednesday, his well-measured words on the economy sending stocks into a broad-based rally and pushing the Dow industrials, the Nasdaq Composite and the S&P 500 index to new all-time highs.
Wall Street perceived from the Fed chief's two-day Congressional testimony that the Fed is likely to leave interest rates unchanged in the near term. On Tuesday, that resulted in a major tumble for stocks and bonds, as some investors' hopes for a rate cut were dashed. But Wednesday was a different story, as market players looked at the other side of the coin: a healthy economy and stable interest rates that can only be good for stocks.
"I think the market is getting more comfortable with what Alan Greenspan has told us," said Peter Canelo, a stock strategist at Morgan Stanley Dean Witter. (159K WAV) or (159K AIFF)
News of a new mammoth merger in the works overseas also lifted spirits in the market as did stronger bonds. Shares of financial and drug companies, along with airline and technology stocks, led the rally.
The Dow Jones industrial average rose 87.68 points, or 1.05 percent, to close at 8,457.78, a new record, eclipsing the previous 8,451.06 all-time high set on Feb. 18.
On the New York Stock Exchange, gainers trounced losers 1,984 to 938 as 616 million shares changed hands.
Broader markets also scored new records. The Nasdaq Composite gained 27.77 to 1,766.48, beating its previous record of 1,751.76, set on Feb. 23; and the S&P 500 index rose 12.34 to 1042.90, surpassing its previous 1,038.14 record scored also on Feb.23. (Look here for the performance of widely held stocks.)
Bonds closed higher as the market found reason for optimism in Greenspan's statements on the economy. The price of the benchmark 30-year Treasury bond rose 20/32 of a point, lowering the yield to 5.92 percent.
The dollar rose against both the German mark and the Japanese yen as investors focused on the Fed chairman's comments Wednesday that Japan is not doing enough to stimulate its crippled economy.
Merger du jour
Equity investors faced a new mega-merger of two large British companies two days after the much touted marriage between drug giants SmithKline Beecham (SBH) and Glaxo Wellcome (GLX) collapsed.
The news this time came from the insurance industry, where General Accident and Commercial Union agreed to join forces in a mammoth deal that would create Britain's largest general insurer. While neither one trades on U.S. exchanges, word of the deal helped lift domestic insurance stocks, among them Chubb Corp. (CB), which rose 15/16 to 78-5/8.
And shares of Cigna (CI) rose 8-15/16 to 186-1/2 after the company announced a 3-for-1 stock split.
Meanwhile, drug stocks rallied as merger speculation continued to grip the industry despite the SmithKline/Glaxo fiasco. American depositary receipts of SmithKline surged 3-7/8 to 63-9/16, and Glaxo's ADRs gained 1-3/4 to 7-1/4, only a day after taking a heavy pummeling from investors.
Other drug-stock gainers included Warner-Lambert (WLA), up 11/16 to 152-5/8, and Eli Lilly (LLY), rising 1-7/16 to 65-3/8.
Banking shares benefited from market perceptions that interest rates will stay put for a while. Chase Manhattan (CMB) rose 2-5/8 to 122-3/8, Citicorp (CCI) advanced 1-3/16 to 127-3/8, and Dow component J.P. Morgan (JPM) jumped 2-1/8 to 118-1/8, adding to Tuesday's strong gains after a job-cut announcement at the Wall Street powerhouse.
And airline stocks soared, led by AMR (AMR), which rose 3-1/4 to 127-5/8. The parent of American Airlines signed a major code-sharing deal with JAL, Japan's premier airline. In addition, Goldman Sachs upgraded the stock to "trading buy" from "market outperform," pegging a six-month price target of $144 a share.
Other high-flying airline shares included Delta Air Lines (DAL), up 2-15/16 at 116-11/16; UAL (UAL), the parent of United Airlines, up 1-3/4 to 87-3/4; and Continental Airlines [CAI.b] [CAI.a], which gained 7/8 to 50-3/8 on news the company has reached a tentative deal with its pilots union.
Technology sharers once again remained among investors' favorites, with Microsoft (MSFT) rising 2-13/16 to 84-15/16 and Intel (INTC) gaining 1-11/16 to 94-1/16.
But not all was well on Wall Street as investors punished the stock of Dura Pharmaceuticals (DURA), taking it down 14-3/16, or more than 37 percent, to 23-15/16 after the company warned that lower revenues and a planned expansion of its sales force would shave 50 cents a share off 1998 earnings. Wall Street had expected Dura to earn $1.39 a share this year. Dura was the most actively traded stock and the largest loser on the Nasdaq.
-- by staff writer Malina Poshtova Zang
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