Stock prices plowed ever higher Thursday through conflicting fields of economic data. Sometimes, stock prices go up because they go up, and there’s not much more to say until they go down.
The Dow Jones industrial average added 6.57 points, to 4411.19, another record high close, on New York Stock Exchange volume of 340 million shares. Broader market indictors also rose.
A resurgence of interest in technology stocks pushed the Nasdaq composite index ahead 6.21 points, to a record high close at 853.83. One of them, microchip-maker Intel, gained 50 cents, to $109.25. Texas Instruments added $1, to $39.50, on the NYSE after the company won a patent-infringement suit against three competitors.
After the close of trading, Cisco Systems, a leader in computer networking systems, posted better-than-expected fiscal third-quarter earnings per share with a surprising improvement in profit margins. The late news could keep the technology stock rally moving Friday.
Investors seemed to ignore economic news that on other occasions might be bearish for stocks. A surprising slump in April retail sales, for example, was greeted by gains in the stocks of major retailing companies.
Even Wisconsin-based Lands’ End, which reported a 71 percent drop in fiscal first-quarter profits to 4 cents a share-well below Wall Street forecasts-gained 12 cents, to $15.62. Sears, Roebuck added $1.12, to $56.12.
In other news, wholesale price inflation was worse than expected in April, suggesting the possibility of higher interest. The Treasury market held steady. And several interest-sensitive industrial stocks, such as International Paper and Caterpillar, posted gains.
The American Iron and Steel Institute reported that steel shipments in March totaled 8.9 million tons, up 14.8 percent from February and the highest since June 1979.
The yield on the closely watched 30-year Treasury bond slipped a notch to 6.98 percent from 6.99 percent.
What If: Many shareholders of U.S.-based multinational companies benefited from this year’s slide in the dollar. That’s because overseas profits translate into more dollars when generated in a nation whose currency has strengthened against the greenback. In addition, the weaker dollar makes U.S. exports cheaper for non-U.S. buyers.
For the moment, at least, the dollar has rebounded against the German mark and Japanese yen. Threats of trade sanctions against the Japanese because of their import policies suggest that Americans will spend fewer dollars to buy Japanese autos. That means Japan’s trade surplus with the United States could be reduced and the flood of dollars to Japan could be stemmed.
Meanwhile, political and economic events in Europe have reduced the safe-harbor value of the mark against such currencies as the French franc. The recent decline in demand for marks, even within Europe, has been bullish for the dollar.
The obvious question is this: If U.S. multinationals and the U.S. investors who own shares in them have benefited by the weakening dollar, will share prices suffer as the dollar strengthens?
Not necessarily, says Richard Strong, head of the Milwaukee-based mutual fund firm Strong Capital Management.
“There’s a chance we have seen a secular low in the dollar,” he said. “There’s a very good chance that this was the final blowoff. When the dollar strengthens I think it’s a positive. European money will be coming over here to play the market,”
A weakening dollar punishes investors in Japan and German, for example, who own U.S. securities, because whatever gains they achieve on their investments are diluted when translated back into their home currency.
A rush of non-U.S. money into U.S. stocks could give the market fresh wind. Strong, an unabashed bull on stocks, predicted that Dow industrial average would reach 5000 by Thanksgiving.
“I think things are the best I’ve seen,” he said, pointing to the higher productivity and competitiveness of U.S. companies. “America is as strong as it’s been probably since the end of World War II.”
Ironically, the stronger dollar is having an inverse effect on bond prices. Paul Kasriel, chief domestic economist at Northern Trust, said central banks that bought U.S. Treasury securities to help prop up the dollar earlier in the year are now selling. On the other hand, he believes the current mood in Congress to cut the federal deficit is bullish for the dollar as well as Treasuries.
Local news: U.S. Robotics, the Skokie-based maker of modems and other computer equipment, gained $3.12, to $78.50, after the company said it will send a free software upgrade to fix a problem that some modem users have experienced: a slowing in the speed of the Sportster v.34-model modem.
– Shareholders of CBI Industries, the Oakbrook Terrace-based construction contracting firm, voted to double the number of shares of the company’s stock to implement an anti-takeover plan adopted in 1986. The stock rose 12 cents, to $25.87.
Late last year, Pennsylvania-based Airgas made an unwelcome and unsuccessful bid to acquire CBI’s Liquid Carbonic subsidiary that makes industrial gases. The unit has become a principal source of profits and revenues for CBI. “We have put $750 million in Liquid Carbonic over the last five years. Now everybody wants to buy it for a bargain,” said George Schueppert, CBI chief financial officer.
