Further gains in telecommunications stocks and a rally in oil shares pushed blue-chips higher into record territory Wednesday. Trading volume was heavy, but the breadth of the rally narrowed.
The Dow Jones industrial average gained 13.13 points to a record closing high of 3652.09 as 301.6 million shares changed hands on the New York Stock Exchange. Advancing stocks outnumbered losers by 5 to 4 among NYSE-listed issues. Broader market indicators rose only slightly, and the Nasdaq composite index dropped 1.48 to 733.66.
Philip Smyth of Birinyi Associates in Greenwich, Conn., said a surge of orders to buy at the closing market price pushed Big Board volume over the 300 million mark and pushed the Dow industrials up 4 points in the 5 minutes between the closing bell and the final tally of NYSE floor trading.
A buy-at-the-close strategy frequently is employed by index funds that attempt to track the performance of a popular stock index, Smyth said.
The bond rally continued for another day after a respectable auction of $11 billion of five-year Treasury notes brought a yield of 4.87 percent. The Bank of Japan was rumored to be a big buyer at the auction through the Federal Reserve, according to Technical Data in Boston. The 30-year Treasury bond yield dropped to 6.17 percent from 6.19 percent Tuesday.
Philip Morris stock was hammered in active trading when it disappointed Wall Street by failing to post a quarterly dividend hike. The food and tobacco giant cited uncertainties in cigarette pricing and the threat of higher cigarette taxes as reasons for holding its dividend at 65 cents a share.
Some analysts were expecting a boost to about 70 cents. Philip Morris dropped $2.25 to $48.87.
Oil stocks rose after a report late Tuesday that U.S. crude oil inventories fell last week.
Oil stocks also attract investors because of their relatively high dividend. Exxon gained 75 cents to $65.87. Amoco rose 12 cents to $57.62.
Computer stocks lost ground. Microsoft fell $1.62 to $74.25 after a downgrade by Piper Jaffray. Locally, System Software Associates of Chicago plunged $4.50 to $17. Late Tuesday, the company disclosed a 24 percent gain in third-quarter profits to 26 cents a share. Analysts were expecting a cent or two more.
E.T., phone your broker
“Does this mean I’ll be able to call home from work to record a program on my VCR?” asked one of Connie Luecke’s colleagues at work Wednesday.
Luecke follows telecommunications companies for the Chicago investment research firm Duff & Phelps.
Like her peers, she’s attempting to sort out the investment implications of a judicial ruling Tuesday that would permit regional telephone companies to offer cable television services in the same market where they sell local phone service.
Telecommunications stocks advanced smartly on the news. Most experts believe significant phone company entry into local cable markets is three to five years away, but the futuristic story has captivated Wall Street.
Stocks of suppliers to the cable industry, such as Chicago-based General Instrument, rallied along with regional phone company stocks.
Luecke believes competition between cable companies providing telephone services and phone companies providing cable video services could be healthy for both industries. Consumers unhappy with cable television service and charges already have prompted Congress to impose new regulations.
“I’d pick Illinois Bell over TCI (Telecommunications Inc., a Chicago-area cable operator),” she said.
John Culver, another telecommunications analyst at Duff & Phelps, said the bottom line is new revenue opportunities for phone companies to make up for revenue loss to cellular phone operations.
He noted that three regional phone companies-NYNEX, US West and Southwestern Bell-are learning the ropes with cable operations in the United Kingdom.
