A sparkling first quarter for the stock market ended on a higher note Tuesday but was accompanied by warnings on interest rates and corporate earnings.
For the moment, though, investors were clinking champagne glasses over performances that were hardly anticipated as 1998 began.
In fact, the quarterly gains would have represented a fairly substantial annual showing until recent years.
The blue-chip Dow Jones industrial average, while down from record heights, still posted a three-month gain of 11.3 percent; the broad-based Standard & Poor’s 500, representing the biggest-name stocks, racked up a 13.5 percent increase, and the small stocks in the Russell 2000 index lagged but still gained 10 percent.
The star performer was the technology-laden Nasdaq composite index, which surged 16.9 percent.
In Tuesday’s action, the Dow rose 17.69 points, to 8799.81. Earlier in the day, it had risen as much as 116.84, to 8898.96–approaching its March 20 record of 8906.43. Still, the slight gain shook off four days of losses that had dragged the Dow down more than 122 points between Wednesday and Monday.
The S&P 500 index rose 8.20, to 1101.75, and the Nasdaq composite climbed 16.98, to a record closing high of 1835.68. The Russell 2000 index jumped 4.44, to a record close of 480.68.
“Looking ahead, the biggest challenge for the stock market will be interest rates,” said Rao Chalasani, chief investment strategist for Everen Securities. “Rates should be rising in the early summer months.”
On Tuesday, Federal Reserve policymakers, as anticipated, left the central bank’s short-term interest-rate target unchanged at 5.5 percent.
The Fed is unlikely to change until the effect of the Asian economic problems becomes clearer, according to Marshall Front, managing director of Trees Front Associates. “There are signs of a slight economic slowdown, and I don’t believe the Fed will act until the dust settles,” he said.
Although interest rates remained steady, the other pillar of stock prices, corporate earnings, is teetering, said David Klaskin, president of Oak Ridge Investments.
“There could be a shock wave of recognition that the earnings level won’t support the lofty valuations placed on big-name stocks,” he said. “Smaller and mid-level companies probably will perform better.”
Overseas gains and the Conference Board’s monthly report on consumer confidence bolstered the market initially. The consumer sentiment barometer fell in March from a 29-year high the previous month as consumers grew more wary that the healthy economic climate may soon slow as a result of Asia’s economic woes.
Such consumer caution boosts the stock market, whose investors have been concerned that the economy was growing so fast that it would revive inflation.
Advancing issues outnumbered decliners Tuesday by about an 11-6 ratio on the New York Stock Exchange, where volume soared to 656 million shares from nearly 497 million Monday.
Technology stocks rose, although the sector could not hold onto the day’s earlier gains. Dell Computer rose 56 cents, to $67.75; Microsoft added $1.50, to $89.50; and Intuit rose 87 cents, to $47.50 on Nasdaq.
Crude-oil prices fell for the second day in a row, reflecting traders’ disappointment that oil-exporting countries had not done more to cut production.
Crude oil for May delivery settled at $15.61 per barrel, down 60 cents, on the New York Mercantile Exchange.
At an emergency meeting, the Organization of Petroleum Exporting Countries agreed to restrain output by 1.245 million barrels a day. Adding in pledges by non-OPEC producers, the cutback amounts to about 1.5 million barrels a day beginning Wednesday.
The agreement fell far short of an earlier one between Saudi Arabia, Venezuela and Mexico to cut production between 1.6 million and 2 million barrels a day.
