The Dow Jones industrial average had one of its best days in a while, but few investors got excited.
The Dow industrials gained 25.47 to 3468.75, just 10 points short of the all-time high set in April. But volume was moderate at 218 million shares among New York Stock Exchange-listed stocks. And broader market indicators advanced at a far slower pace.
The Nasdaq composite index of over-the-counter stocks added just 0.24 to 683.06. Technology stocks fell after a report of lower orders for semiconductors. Microchip-maker Intel dropped 3 points to $99.50.
Alfred Goldman, technical market analyst for A.G. Edwards & Sons in St. Louis, said the blue-chip buying was concentrated in the heavy industrial stocks, such as Caterpillar, which gained 87 cents to a new 365-day high of $69.75.
Goldman said investors avoided retailing stocks, although consumer spending accounts for two-thirds of the nation’s gross domestic product. So, if the market is betting on an economic recovery, it’s not carrying that bet too far.
“There is not a lot of confidence in consumers or consumer spending,” he said. “The market lacks oomph. There just isn’t much interest. Most major market participants are bored.”
Rao Chalasani, chief investment strategist at Kemper Securities in Chicago, agreed. Mutual funds are collecting a great deal of cash from eager investors but not finding many places to put it to work in the equity market, he said.
Most of the buying has been in stocks on the rebound from recent selloffs, he said. That’s hardly an aggressive approach to the market.
The accompanying graph shows the low level of excitement. In March and April, many trading days saw 150 or more stocks hitting new 52-week highs. Lately, the number is less than half that amount.
To technical analysts, such a trend indicates a market that’s run out of gas. Recent declines in daily trading volume confirm the trend.
Two things must happen to give the market new life, Goldman said: either some upbeat news on the political or economic front or a decline in stock prices strong enough to spark buying interest. Goldman is betting on the second of those possibilities happening first.
“We need something to give people a reason to come off the sidelines,” he said.
TREASURY AUCTION
The 4.27 percent average yield on the Treasury’s auction of $16 billion of three-year notes helped boost stock prices into the close Tuesday.
Commenting on the auction, Fred Leiner, market strategist at Continental Bank said, “I think it was good, not great, but good.”
For one thing, yields at the three-year level have been relatively high compared to maturities of two years or less, he said. That helped attract buying. After the auction, the yield on the new three-year note dropped to 7.24 percent trading on a when-issued basis, another sign of strong investor interest.
But Tuesday’s results tell nothing about what’s likely to happen in Wednesday’s 10-year auction and Thursday’s 30-year auction, Leiner said. The maturities are too far apart, he said.
Analysts at Technical Data in Boston are bullish, however, citing the slow economy and the amount of cash looking for a home among institutional investors. They said the Treasury bond yield could be on its way to 6.5 percent, down from the 6.81 percent close Tuesday.
THIS BUD’S FOR YOU
Beer stocks rose Tuesday on reports that President Clinton will exempt beer from so-called sin taxes he might propose to help pay for health-care reform.
Anheuser-Busch rose $1.87 to $51.75; Adolph Coor’s B stock rose 50 cents to $17.75.
Earlier, Clinton backed off including certain forms of energy in his proposed BTU energy tax. Archer-Daniels-Midland, Decatur, Ill.-based maker of corn-based ethanol fuel, was one of the beneficiaries.
Republicans in Congress may have a hard time negotiating with Clinton, but it looks like other special interests aren’t having the problem.
