Stocks Reverse Slide, Driven by Tech Rally
Stocks rebounded from two days of stiff profit taking Thursday as a stable bond market and a rally in semiconductor shares stoked buying.
“We went down 30 [on the Dow] and bam! The buyers came back, helped by bonds,” said Alfred E. Goldman, technical research director at A.G. Edwards & Sons in St. Louis. “Techs led the way higher.”
The Dow Jones industrial average rose 19.58 points to 5,693.41, about 22 points shy of its high for the session but up from a deficit of nearly 30 points around midday.
Broader-market measures also rose. Early in the day, long-term interest rates started creeping closer to 7%--a level that has spooked the stock market in recent weeks. But the 30-year Treasury bond yield ended the day little changed, at 6.93% from 6.94% on Wednesday.
Higher rates can mean higher corporate borrowing costs, slower consumer spending and slimmer profits--all negatives for the stock market.
But stocks began rallying as bargain hunters moved in, Goldman said.
“The drop encouraged the sideline cash,” Goldman said. “People tend to forget we’ve added 375 Dow points in three weeks. We’ve been on a very normal pause to refresh.”
However, the advance in stocks faltered with the prevailing concerns about a strong economy and an overpriced market.
Advancing issues outnumbered decliners by nearly 4 to 3 on the New York Stock Exchange, where volume totaled 381.97 million shares, up from the slow post-holiday pace of the last two sessions.
The technology heavy Nasdaq composite index rose 7.85 points to 1,233.48, helped by semiconductor shares, which rose after South Korea’s Samsung Electronics said it will cut monthly semiconductor production by 15% in a move to slow a decline in global memory chip prices.
But overall, “a lot of people feel the worst is over for chip stocks and even if we’re looking at one or two bad quarters, we . . . see a year-end pickup in demand with corporate upgrades,” said Arnie Owen, director of equities at Kaufman Bros.
In economic news, the Commerce Department reported its revised reading on gross domestic product for the first quarter was 2.3%, half a percentage point lower than the initial estimate. The lower figure did not provide much relief because the decline came from a big drop in business inventories, which sets the stage for faster growth.
Adding to concerns about possible a Federal Reserve Board rate increase was a second report showing that sales of new homes rose by an unexpectedly sharp 6.7% in April.
Among market highlights:
* AT&T; lost 1 1/8 to 63 amid worries of a price war after its promotion of free medium-distance calls in Ameritech’s Illinois market. Ameritech fell 1 7/8 to 57 1/8.
* Storage Tech lost 2 5/8 to 32 5/8 after its CEO said he saw a 35% drop this year in some storage device prices.
* Software maker Borland slumped 3 3/4 to 13 3/8. It said Wednesday a first-quarter operating loss was likely unless sales exceed expectations.
* Asyst Technologies lost 4 1/2 to 24 after it forecast a fourth-quarter loss and said its president resigned to pursue other opportunities.
Overseas, Germany’s Bundesbank failed to lower short-term interest rates Thursday as many had expected, weakening the dollar and giving the mark a lift.
By 4 p.m. in New York, the dollar traded at 1.5344 marks, down from 1.5360 marks Wednesday. The dollar fetched 107.65 yen, down from 108.20 yen.
