NASDAQ Hits Still Another High : Market Overview

Smaller stocks continued to lead the way on Wall Street, as the NASDAQ composite index hit its second record-high close in as many days. Airline and brokerage stocks also surged. Trading was heavy overall.

* Bond yields eased, helped by a low inflation report and a rumor that the Federal Reserve sees further room to cut interest rates.

Stocks

In what has become a familiar pattern to investors in recent months, technology stocks rallied sharply, pushing the NASDAQ market up 1.3%.

The NASDAQ composite index leaped 8.92 points to a record 695.70, while the blue chip Dow Jones industrials settled for a 4.32-point gain to 3,267.88.

Advancing issues outnumbered decliners by about 12 to 8 on the NASDAQ market and 12 to 7 on the New York Stock Exchange. Volume on both markets was heavy: 245 million shares on the NASDAQ and 305 million on the NYSE.

“It doesn’t look like it wants to stop,” said Robert O’Toole Sr., head of NASDAQ trading at Lehman Bros. “There was strength right across the board.”

Healthy fourth-quarter corporate earnings reports from a number of major technology firms have helped pull more investors into those stocks this week.

In general, investors appear to be convinced that corporate profits will revive across the board this year as the economy recovers. Thus, stocks continue to be viewed as the most appealing investment, analysts say.

Another ongoing trend is a flight out of old-favorite drug stocks and other consumer issues, and into technology stocks and other issues more sensitive to the economy’s strength.

Among the market highlights:

*Intel continued to lead the tech pack, gaining 2 5/8 to 112 3/4 after surging 8 1/8 on Wednesday, when the firm reported dramatically higher quarterly earnings.

Thursday, two other major earnings surprises buoyed the market: troubled Digital Equipment shot up 7 3/8 to 42 1/4 after reporting a much smaller than expected quarterly loss. And Motorola leaped 10 7/8 to 123 1/4 after announcing that quarterly profit jumped 44%.

* Among other tech issues reporting healthy earnings, Xilinx zoomed 4 3/8 to 30 1/8, and Parametric Technology soared 5 to 58 1/2. Both are software firms.

Other tech gainers included Compaq, up 3 1/8 to 53 3/4; Hewlett-Packard, up 2 7/8 to 74 1/8; AST Research, up 2 1/2 to 24 1/4; Texas Instruments, up 3 1/8 to 56 5/8; Xircom, up 1 1/2 to 9 1/4, and Creative Technology, up 2 1/4 to 22 1/2.

* Airline stocks rebounded dramatically as the threat of a wholesale new fare war seemed to recede. UAL, parent of United, jumped 5 1/4 to 130 1/2, Delta zoomed 3 1/2 to 53, Southwest added 1 to 29 1/8, and American Airlines parent AMR leaped 2 to 69.

* Brokerage stocks were hot, as the continuing bull market improves the firms’ chances of higher earnings in 1993. Merrill Lynch soared 4 1/8 to 64 1/2, PaineWebber rose 1 7/8 to 26 1/8, Morgan Stanley shot up 3 1/4 to 58 3/8, and Charles Schwab gained 2 3/4 to 31.

Elsewhere among financial stocks, banking giant J.P. Morgan tumbled 3 1/8 to 61 1/2 after reporting disappointing fourth-quarter earnings. Analysts cited losses in the firm’s trading of mortgage securities, and warned that other big banks may also have been affected.

* Drugs stocks were notably weak again. Merck fell 1 3/8 to 42 after Morgan Stanley lowered its earnings estimates. Also losing altitude were Schering-Plough, off 7/8 to 58 1/4; Pfizer, down 5/8 to 65 5/8, and Syntex, off 1/2 to 22.

But Alza soared 2 5/8 to 45 1/2 after announcing regulatory approvals of several products that use Alza’s improved drug-delivery systems.

* Health maintenance organization stocks bucked the downtrend in drugs. The HMOs are expected to benefit under President-elect Bill Clinton’s heath care cost-containment plans. PacifiCare Health jumped 1 5/8 to 50 7/8, FHP gained 2 3/4 to 21 1/2, and U.S. Healthcare added 2 1/2 to 54.

Overseas, London stocks reversed a string of losses, as the Financial Times 100-share average climbed 13.9 points to 2,759.2.

In Frankfurt, the DAX average finished up 7.24 points to 1,523.74.

But in Tokyo, the Nikkei average eased 2.31 points to 16,515.60. The Japanese market is closed today for a holiday.

Credit

Bond yields eased, as the government reported that producer prices rose just 0.2% in December and 1.6% in 1992--one of the best showings of the last two decades.

A report of higher than expected weekly unemployment claims also suggested lingering weakness in the economy.

The yield on the Treasury’s main 30-year bond fell to 7.39% from Wednesday’s 7.43%. Shorter-term yields also slipped.

Jim Sickling, a bond trader at Kemper Financial Services in Chicago, said sentiment also was helped by rumors that an unnamed Federal Reserve official reportedly said interest rates could be cut further to help the economy.

However, the overall appetite for Treasury securities continued to be dampened by heavy issuance of corporate bonds--an estimated $4.15 billion Thursday alone.

The federal funds rate, the interest on overnight loans between banks, was 3.06% versus 2.94% Wednesday.

Other Markets

The dollar ended mostly higher on world currency markets, apparently betting on a stronger U.S. economy down the road.

In New York, the dollar finished at 125.85 Japanese yen, up from 125.65 on Wednesday. However, the dollar eased to 1.620 German marks from 1.623.

Elsewhere, it was a buyer’s market for wheat futures on the Chicago Board of Trade, with the commodity gaining on signs of stronger export sales and a tightening supply picture. Wheat for March rose 4 cents to $3.79 a bushel.

Energy futures on the New York Merc gained in a late rally, though worries dissipated about disruption of oil supplies in the Mideast. Light, sweet crude for February closed 20 cents higher at $18.70 a barrel.

On New York’s Comex, near-term gold fell 20 cents to $327.30 an ounce, and March silver slipped 2.2 cents to $3.68.

Market Roundup, D6