Stocks staged a broad rally Wednesday, as investors turned optimistic on several fronts, from prospects of a settlement of the General Motors strike to the outlook for semiconductor giant Intel.
After-hours trading in Internet stocks boomed, following an upbeat second-quarter report by Web browser company Yahoo.
The Nasdaq composite index reached its first record high since April 22, jumping 27.28 points, or 1.4 percent, to 1935.39.
The Dow Jones industrial average gained 89.93, or 1 percent, to 9174.97, on New York Stock Exchange volume of 605 million shares. The broader Standard & Poor’s 500-stock index added 11.72, or 1 percent, to a record closing high 1166.37.
Travelers Group and GM led the blue chips higher. Would-be merger partners Travelers and Citicorp rallied after a Merrill Lynch analyst issued a “buy” recommendation for the combination, which would be called Citigroup. Analyst Judah Kraushaar called the proposed combination “a new model for the millennium–a financial-services company possessing unparalleled business diversification.”
Travelers rose $4.69, to $69.25, and Citicorp added $11.37, to $171.87.
Despite Wednesday’s downbeat forecast of computer chip sales by Schaumburg-based Motorola, analysts said they believe Intel will be the beneficiary of a pending upturn in chip sales. Morgan Stanley Dean Witter analyst Mark Edelstone said inventories of business computers are thinning.
Intel is expected to post second-quarter results Tuesday, and analysts will be watching closely for the company’s outlook for the rest of the year. In Wednesday’s trading, Intel gained $3.19, to $78.31, and Motorola fell $2.81, to $52.19.
Internet-related stocks rebounded from a setback Tuesday. Several leaders in the sector slumped in the regular Nasdaq session but rallied strongly in after-hours electronic trading following the Yahoo earnings announcement.
Yahoo posted an operating profit of 15 cents a share, well above the consensus Wall Street forecast of 9 cents, and revenues nearly tripled, jumping to $41.2 million from $14.1 million in the year-earlier quarter. The company also declared a 2-for-1 stock split.
Early Wednesday, Montgomery Securities withdrew its “buy” rating on Yahoo stock, and in the regular Nasdaq session, before its earnings report, Yahoo’s shares fell $4.81, to $186.03.
But in after-hours trading, Yahoo shares were quoted at $202, not far from their all-time peak of $207.50, reached Tuesday.
Excite, another Internet browser service, also declared a 2-for-1 stock split. The stock was quoted at $95 in after-hours trading after dropping $4.87, to $91.37, in the regular Nasdaq session.
Internet bookseller Amazon.com lost $15, to $107.12, in the regular Nasdaq session but was quoted at $113 in after-hours trading. Another bookseller that never made it onto the Internet, Crown Books, said it expects to file for bankruptcy protection this week. Trading was halted in the stock Wednesday after a close of $4.81 Tuesday.
Investor confidence: A periodic index of investor optimism published by PaineWebber and the Gallup Organization declined in June from its peak in April.
Introduced at a baseline of 100 in October, 1996, the index, measuring the outlook of investors with at least $10,000 in household savings or investments, hit 171 in April and slipped to 162 in June.
Reflecting the resilience of individual investors, 46 percent of those surveyed said they believe stocks are overvalued, but 72 percent said “now is a good time to invest.”
Looking forward, respondents on average said a minimum “acceptable” rate of return on their investments next year would be 11 percent. That’s a remarkably cautious outlook, considering that the benchmark S&P 500 index returned 22 percent in 1996, 33 percent last year and has chalked up an annualized rate of return of 44 percent so far this year.
Looking at several major cities, the survey finds higher investor optimism in Miami, New York and Los Angeles than in Chicago, which registered a below-average 139 in the June index.
Dennis Jacobe, research director at Gallup, said the Chicago number reflects the fact that the Midwest economy has been less volatile than either coast over many years. “You haven’t had the highs and lows,” he said.
Indeed, the Great Lakes economy stood still in the second quarter as manufacturers drew down inflated inventories, the Asia slowdown reduced demand for exports and the General Motors strike rippled thorough the region, First Chicago NBD Corp. economist Diane Swonk reported Wednesday. “The stage is set for a substantial rebound in growth, however, once strikers return to work and GM’s competitors boost production to gain market share,” she said.
Local news: uBid, an Elk Grove Village-based developer of a merchandise auction service on the Internet, filed with the Securities and Exchange Commission for an initial public offering through underwriters led by Merrill Lynch and William Blair.
– Nanophase Technologies, Burr Ridge, a developer of advanced particles for several industries, said it expects to report second-quarter revenues of $215,000, down from $603,000 a year earlier. The stock, which went public at $8 in November, closed unchanged at $4.94.
