Another good-hair day in the bond market Thursday plus news of billions in fresh dollars flowing into equity mutual funds lifted stock prices broadly and sent several stock indexes to record highs.
The Dow Jones industrial average gained 25.71 points to 4732.77, just short of the record closing high of 4736.29 on July 17. The broader Standard & Poor’s 500 index added 3.61 points to a record closing high of 565.22. The Nasdaq composite index climbed 10.48 points to 1010.66.
An unexpected decline in new orders for durable goods in June-the fourth decline in five months-gave heart to bond traders because it signaled that the economy remains sluggish and interest rates have room to decline. New orders fell 0.1 percent to $159.3 million following a 2.6 percent gain in May.
The yield on the 30-year Treasury bond, which moves inversely to price, declined to 6.84 percent from 6.88 percent.
Although gains in technology stocks continued, several non-tech stocks were boosted on upbeat earnings reports. Chicago-based chemicals and equipment firm FMC gained $3.62 to $73.75, a 52-week closing high after its latest earnings per share beat Wall Street estimates.
Household International, Prospect Heights, added $2.25 to a 52-week closing high of $54.12 on an upbeat earnings report.
That’s not to say that technology stocks took a breather. Genetic engineering leader Amgen added $2.37 to $86.62 following Wednesday’s $4.37 gain on news of progress toward a cure for obesity. Computer modem maker U.S. Robotics tacked on another $7 to Wednesday’s incredible $20.25 gain to close at $148.
Information, please: U.S. investors in recent years have flocked to buy shares in the telephone companies of Mexico and Latin American countries in the belief that telephone share prices are bound to advance along with these emerging economies. Will they find the same promise in the Italian telephone company, known as Stet-Societa Finanziaria Telfonica?
American depositary receipts representing 10 shares each of Stet began trading Thursday on the New York Stock Exchange as part of the exchange’s effort to attract more non-U.S. listings. Italy is privatizing its telephone company and plans to sell the 64 percent of Stet it still owns by the end of the year. Stet controls the sixth-largest phone company in the world.
An article in the Aug. 1 issue of Financial World magazine raises a caution about the privatization move, noting that a single investment bank in Italy will control the share underwriting and could exert undue influence over the pricing.
In Thursday’s trading the Stet ADRs closed at $31.75 as 109,700 of the units changed hands.
Look out: The stock market is about to enter an eerie period.
The end of the second-quarter earnings reporting period will mean an end to trade-generating earnings surprises that have energized Wall Street, for better or worse, over the last several weeks.
It’s also the start of the summer dog days, when many investors, brokers and traders go on vacation. Although a great deal of cash is cycled automatically into stock mutual funds through payroll-related savings plans, many investors with discretionary income will be more interested in vacations and back-to-school buying than investing.
August also will see a potentially disruptive refunding of billions of dollars in Treasury securities.
There’s a chance, though slim, that the news media will report in August what Congress has been doing to us in July behind the scenes of the diversionary, made-for-TV Whitewater and Waco hearings. The status of the highly touted fiscal restraint may become clearer and may not live up to its billing.
In short, August often sets the tone for the rest of the year.
Marshall Front, of the Chicago investment advisory firm Trees Front Associates, says that the economic data he has seen remain bullish for bonds. There’s little, if any, sign of an economic pickup, he said.
That suggests the slowdown in corporate earnings momentum that some analysts expected to see in the second-quarter reports may become more apparent in the third quarter.
Local news: Moody’s Investors Service said the creditworthiness outlook for $6.4 billion in long-term UAL corporate debt is improving. Moody’s said UAL, parent of United Airlines, has made significant progress in cutting costs and improving productivity and is enjoying higher revenues through global growth. Moody’s warns that all airlines are vulnerable to a possible economic downturn and higher U.S. taxes on airline fuel, set to take effect Oct. 1.
– Standard & Poor’s raised its credit rating on certain debt securities of Chicago-based building products maker USG to double-B from single-B-plus. Separately, USG completed a $500 million bank credit arrangement that will be used to pay down debt that bears interest of 10.25 percent.
– MAF Bancorp, Clarendon Hills, parent of Mid-America Federal Savings Bank, will pay a special 10 percent stock dividend on Aug. 31 to shareholders of record Aug. 15. Investors will get one new share for every 10 shares they own. The quarterly dividend rate of 8 cents a share will be maintained, thereby awarding investors a 10 percent dividend increase.
– Antec, a supplier to the telecommunications industry based in Rolling Meadows, gained $1.25 to $18.50 after the company announced three joint ventures with Northern Telecom, a Canada-based telecommunications firm.
– Franklin Park-based steel service company A.M. Castle raised its quarterly dividend to 15 cents a share from 12 cents, payable Aug. 17 to shareholders of record Aug. 11.
