Blue-chip stocks again posted record-setting gains Tuesday, fueled by a continuation of the recent bond market rally. Computer-technology stocks slipped, despite Monday’s upbeat report on computer-chip demand in October.
The Dow Jones industrial average added 10.44 points to 6266.04, its fifth consecutive record close. New York Stock Exchange volume totaled 472 million shares as winning stocks outnumbered losers by just 13-to-11 among NYSE-listed issues.
The Nasdaq composite index slipped 6.14, to 1256.53. Illustrating the nervous state of the high-tech sector, semiconductor giant Intel dropped $2.87, to $121, on extraordinary Nasdaq volume of 12.4 million shares after traders reacted anxiously to discouraging words from Goldman Sachs about the outlook for personal-computer sales.
Monday’s better-than-expected report on October’s computer-chip demand was good news for another leading chipmaker, Motorola, which gained $2, to $52, on the New York Stock Exchange.
Informix, a software developer, sank $3, to $17.62, on 20.6 million shares traded after two analysts reduced their earnings forecasts for the company.
After the close of Nasdaq trading, Dell Computer posted much better-than-expected third-quarter profits of $1.56 a share, not counting a one-time charge to earnings of 4 cents a share. Chief executive officer Michael Dell told Reuters he expects personal-computer sales to climb by 20 percent in 1997.
Dell announced a 2-for-1 stock split payable Dec. 6 to shareholders of record Nov. 25. Software developer Microsoft also announced a 2-for-1 split, payable about Dec. 6 to shareholders of record Nov. 22.
As high-tech high-fliers came under fresh scrutiny, three laggards among the 30 Dow Jones industrials had a day in the sun Tuesday. The three biggest gainers in the Dow were Union Carbide, up $1.87, to $45.62; Aluminum Co. of America, up $1.50, to $61.25; and Woolworth, up $1.50, to $24.25.
The bond rally is helping breathe life into such stocks. With bond traders almost unanimously expecting no interest-rate move at the Federal Reserve’s policy committee meeting Wednesday, the yield on the benchmark 30-year Treasury bond that was sold last week fell to 6.44 percent from 6.50 percent Friday. (The bond market was closed Veterans Day.)
Analysts are expecting no inflation scare in Wednesday’s report on producer price inflation for October.
The favorable interest-rate environment is bringing corporate debt issuers into the market in droves. More than $1 billion of new investment-grade corporate debt was offered Tuesday.
Among stocks in the news, Sunbeam fell 50 cents, to $25.37, perhaps reflecting selling on the widely expected news of cutbacks engineered by its new chief executive officer, Albert “Chainsaw Al” Dunlap. The company disclosed Tuesday it will eliminate half its 12,000-member work force, a move typical of Dunlap’s modus operandi at other companies.
On the day Dunlap was hired in mid-July, Sunbeam stock jumped 50 percent, to $18.62.
Texaco fell $1.87, to $95.37, on word that civil rights leaders might stage a boycott against the company because of recent disclosures of racist remarks by former company executives and a discrimination lawsuit pending against the company.
Elsewhere, equity investors were heartened by news that Robert Stansky, manager of the giant Fidelity Magellan Fund, increased the proportion of the fund invested in stocks to 88.9 percent at the end of September from 83.9 percent at the end of August. The bond portion of the fund fell to 9.8 percent from 11.8 percent over the same period.
The decision by Stansky’s predecessor, Jeffrey Vinik late last year to load up on Treasury securities proved to be one of the biggest boners in recent investment history. The Magellan fund for the first 10 months of the year returned 7 percent, less than half the 16.6 percent return for the Standard & Poor’s 500-stock index.
New stocks in the fund’s top 10 holdings are Intel, General Electric and International Business Machines. The fund’s stake in computer-technology stocks, once Vinik’s claim to fame, was back up to 10.7 percent at the end of September, after Vinik dumped most of that sector late last year. Vinik left in May.
One of the leaders of the campaign to force the giant College Retirement Equity Fund, or CREF, to divest its holdings of Philip Morris said the campaign will be mounted again next year after receiving only 22 percent of the vote at Monday’s CREF annual meeting. The fund is the largest holder of Philip Morris stock.
Dr. Gene Feingold, a professor emeritus at the University of Michigan School of Public Health, said only 28 percent of the current or retired college faculty members and administrators who hold shares in CREF voted on the proposal. He and others also plan to ask the CREF board of directors to abstain from taking a position on the issue next time. The board publicly opposed the divestiture proposal this year.
Local news: Allstate, Northbrook, has expanded its share-repurchase program to as much as $750 million worth of stock by the end of 1997. At the current price, that represents about 13 million shares. The company already has acquired 4.8 million shares under the program. Allstate added 50 cents, to a 52-week high of $57.87.
– PaineWebber issued a “buy” recommendation for Chicago-based Amerin, a provider of mortgage insurance to lenders. The stock gained 87 cents, to $21.
– Central Steel & Wire will pay a yearend dividend of $40.50 a share on Dec. 6 to shareholders of record Nov. 22.
