Stock prices stabilized Thursday after Wednesday’s raucous trading. Even some technology shares, which have been taking a beating in recent days, recovered a bit.
The Dow Jones industrial average added 12.68 points, to 4641.55, on New York Stock Exchange volume of 381 million shares. Broader market indexes also rose. The Nasdaq composite index, which dropped almost 36 points Wednesday, closed up 7.74 points, to 960.57.
The Dow Jones transportation average, considered by some to be a harbinger of the Dow industrials, gained 25.39 points, or 1.4 percent, to 1837.42. International Business Machines, which led the Dow industrials lower Wednesday with a $5.75 drop, recovered $2.87, to $104.12.
No economic reports are due out Friday, and bond traders are expected to take off early for the weekend.
Meanwhile, the parade of second-quarter corporate earnings reports is passing pretty much as expected. General Motors, Compaq Computer, Northwest Airlines and Exxon were among the companies reporting upbeat earnings.
Ben Zacks, executive vice president of the Chicago-based earnings estimate service Zacks Investment Research, said airlines, technology, paper, brokerage and bank companies generally are posting better-than-expected earnings. Auto, auto-parts, trucking and home furnishings are among the weaker sectors.
Overall, “there are very few disappointments,” Zacks said.
Friday marks the monthly expiration of stock options and stock index options, which sometimes increases trading volume and price volatility. But overall, traders breathed a sigh of relief Thursday that Wednesday’s market slide apparently was contained to the institutional trading community and did not spread to the public investor.
Does that mean the Teflon stock rally of 1995 will resume? Who knows? Many stock indexes already have racked up a respectable year’s worth of gains, so the onset of the dog days of summer would not be a crisis.
David Klaskin, Chicago-based money manager at Oak Ridge Investments, says investors nervous after the fast-paced selling of big-name technology stocks may want to turn their attention to less widely followed stocks in the technology, financial-services and health-care sectors.
“Liquidity is a double-edged sword,” he said. Yes, smaller-capitalization stocks are less liquid and can be difficult to unload in a rush, but sometimes “out of sight, out of mind” is a good rule of investing when the Wall Street herd is trampling on the well-known stocks.
“There are a lot of people waiting to get into the market,” Klaskin said. “The opportunities are much greater in the small- to mid-cap area.”
Among stocks in the news, OfficeMax rose $1.37, to $21.37, as 21 million shares in the company, including Kmart’s remaining stake in its former subsidiary, were sold.
Bond betrayal?: Bond traders are concerned that the Federal Reserve acted prematurely in cutting short-term interest rates July 6. Bond yields generally have risen since then, and prospects for another short-term rate cut in August were dimmed by Federal Reserve Board Chairman Alan Greenspan’s upbeat assessment of the economy in congressional testimony Wednesday.
“The overall bearishness pervading the Treasury market is due in large part to lost Fed credibility,” said bond market commentator Greg Jones of MMS International.
“Our preferred explanation for the rout in Treasuries is that the market is now recognizing the underlying strength of the economy and that the Fed, by validating earlier market fears of recession, has sacrificed credibility.”
In addition, the bond market is suffering from a heavy weight of corporate debt issuance, which competes for fixed-income investors’ dollars and prompts many institutional traders to sell Treasury securities as a hedge if they are buying corporate bonds.
The Treasury will add to the supply next week, when it auctions $17.75 billion of two-year notes Tuesday and $11 billion of five-year notes Wednesday.
In trading Thursday, the benchmark 30-year Treasury bond yield closed unchanged from Wednesday at 6.86 percent. The auction of $18.3 billion of 52-week bills brought an average yield of 5.7 percent.
Local news: CDW Computer Centers, Buffalo Grove, one of the computer retailing outfits whose fortunes depend heavily on the success of Microsoft’s Windows 95 operating system due out next month, gained $2.50, to $52.75, after a strong earnings report.
CDW said that in the next few days it will register with the Securities and Exchange Commission an offering of 500,000 additional common shares. Certain company insiders plan to sell an additional 750,000 shares.
– Northfield Laboratories, Evanston, registered with the SEC to offer 2.5 million common shares. The company is developing a chemically modified hemoglobin that can be an alternative to human blood in transfusions.
– First Oak Brook Bancshares boosted the quarterly dividend on its Class A shares to 9 cents a share from 7.5 cents, payable Oct. 20 to shareholders of record Oct. 10.
– John Nuveen, the Chicago-based municipal-bond firm, raised its quarterly dividend to 18 cents a share from 16 cents, payable Sept. 15 to shareholders of record Sept. 1.
– Chicago-based Kemper set next Thursday as the record date for shareholders to receive stock representing 44 percent of its securities brokerage operations. The majority interest in the brokerage operations, to be called Capmarc, is to be sold to the employees.
