Blue Chips Rally as Dow Rises 14.86 : Market Overview

Blue chip stocks ended higher, bolstered by strong gains in drug and retail stocks as the market attempted to catch up with recent gains in secondary shares.

* The dollar fell against most major currencies during a quiet day of trading.

Stocks

Trading set its busiest pace in more than three weeks despite Veterans Day observances that closed government offices and banks.

The Dow Jones average rose 14.86 points to 3,240.33, recouping most of Tuesday’s 15.40-point loss.

Advancing issues outnumbered those declining by about 9 to 5 on the New York Stock Exchange. Big Board volume came to an estimated 243.75 million shares, up from 223.18 million on Tuesday.

Investors bought blue chips in an effort to narrow the gap with the runaway gains in the secondary market, analysts said.

“There’s a lot of talk that when these small caps act well like this, it’s usually the beginning of an up market,” said Nicholas Karos of Piper Jaffray.

Analysts said secondary stocks were outperforming the Big Board on expectations they will do well under Bill Clinton’s presidency.

“We’ve had a real good move in the NASDAQ stocks, and today we just ended up catching up on the listed side. The market looks like it wants to move to a higher level,” said Ron Doran, director of institutional trading at C. L. King & Associates.

Analysts said now that the uncertainty of the presidential election is behind the market, stocks that were battered during the campaign are beginning to show signs of recovery.

“From a valuation perspective, those issues hit extremely hard are now in a better position to rally.”

In Wednesday’s trading, drug stocks rallied strongly after a Wall Street Journal report that Clinton’s planned health care reforms are likely to go into effect only gradually.

* Among the most active NYSE issues, Merck rose 2 to 44 7/8; Glaxo Holdings was up 3/8 to 25, and Bristol-Myers Squibb added 2 1/8 to 68 1/2. Elsewhere in the industry, Abbott Laboratories gained 1 1/8 to 29 3/8; Eli Lilly rose 1 5/8 to 62 1/4; Upjohn added 1 to 31 5/8, and Syntex gained 7/8 to 25 1/2.

* Among retailers, Nordstrom Inc. rose 3 1/2 to 35 1/4 after it reported third-quarter earnings on Tuesday that topped Wall Street’s consensus forecasts. Smith Barney, Alex. Brown & Sons and Prudential Securities all upgraded their rating on Nordstrom to buy from hold.

* Sears, Roebuck rose 1 1/2 to 43 3/4, and J. C. Penney added 7/8 to 76 3/8. Federated Department Stores, which emerged from bankruptcy early this year, gained 1/8 to 17 after reporting a profit for the third quarter.

* International Paper fell after Bear Stearns downgraded its rating and estimates. It lost 1/4 to 62 7/8. Other paper stocks fell in sympathy.

* Meanwhile, Scientific-Atlanta was up 2 1/4 to 34 after declaring a three-for-two stock split and raising its dividend.

* On the downside, Home Shopping Network tumbled 1 3/8 to 4 1/2. Late Tuesday the company projected lower quarterly profit, citing the weak economy.

* Dataram, traded on the American Stock Exchange, jumped 2 7/8 to 11 1/4. The company posted earnings for the fiscal second quarter ended Oct. 31 of 23 cents a share, up from 15 cents a share in the like period a year earlier.

* Autodesk gained 3/4 to 55 1/2 in NASDAQ trading.

Overseas, shares closed sharply lower in London amid heavy selling in the futures market and uncertainty over the government’s autumn spending statement. The Financial Times 100-share average ended 17.8 points down at 2,696.8.

In Frankfurt, the 30-share DAX average retreated to a close of 1,512.21, down 6.85 points on the day.

Tokyo’s 225-share Nikkei average finished down 118.96 points at 16,318.15.

Currency

Investors were skittish about buying dollars at current rates because they don’t know if the prices are topping out or will later be part of a middle range of prices.

Amy Smith, a currency analyst with the financial consulting firm IDEA, said that “people are uncomfortable buying at these levels. No one wants to buy at the top. They want to buy their dollars a little bit cheaper.”

In New York, the dollar fell to 123.98 Japanese yen from Tuesday’s close of 124.20. The greenback also fell to 1.585 German marks, down from 1.598 marks. The British pound rose to $1.525 to buy one pound, more expensive than Tuesday’s $1.516.

Commodities

Corn and soybean futures rebounded on the Chicago Board of Trade after the markets shook off higher production forecasts that forced corn prices to a 4 1/2-year low early in the session.

Wheat and oat futures also advanced in Chicago.

On other commodity markets, precious metals erased some of their recent losses; energy futures were mixed, and livestock and meat futures were mostly higher.

On the Board of Trade, corn for December delivery rose 2.25 cents to settle at $2.088 a bushel; November soybeans jumped 9.25 cents to $5.585 a bushel; December wheat rose 1.25 cents to $3.658 a bushel; December oats rose 1.25 cents to $1.378 a bushel.

Elsewhere, gold futures rose amid short-covering on New York’s Commodity Exchange, ending a six-day downturn that had pressed prices to their lowest level in nearly seven years. Gold closed up $2 at $331.70 an ounce, and silver rose 2.4 cents to $3.67 an ounce.

Crude oil futures were little changed, and heating oil futures ended mixed. Light, sweet crude oil for December delivery finished unchanged at $20.47 a barrel.

Credit

The Treasury market was closed for the Veterans Day holiday.

However, Treasury bond yields were unchanged at 7.66% in light European dealings.

The price of the Treasury’s bellwether 30-year bond rose 3/32 point, or 93.75 cents per $1,000 in face amount, in late London trading.

Market Roundup, D8