The stock market’s gyrations around the 9300 level on the Dow industrials suggest that investors have adopted a been-there, done-that attitude toward stocks, at least for the time being.
Even with Monday’s 212-point rally, a pattern of sluggish trading and a lackluster ratio of daily advancing stocks over decliners indicates that exuberance–irrational or otherwise–has subsided. Even Internet stocks are well off their highs of just a few weeks ago, and only the best-known, most liquid stocks seem to be advancing steadily.
For example, on Monday, major airline stocks as well as General Motors and Ford Motor joined major computer-technology stocks in the winner’s circle after positive analyst comments about Delta Air Lines and GM.
Despite what many analysts see as a thin market focused on the biggest of companies, an undercurrent of investor optimism is broad and deep, according to a new survey by PaineWebber and the Gallup Organization.
The survey of about 1,000 individuals with at least $10,000 in savings and investments reveals that investor optimism–a key ingredient in the current bull market–has never been higher.
Public approval of the federal budget surplus and of President Clinton’s proposals to deal with Social Security and enact selected tax cuts, “appears to have improved investors’ short-term views of the markets,” said Mary Farrell, senior investment strategist at PaineWebber.
Indeed, the monthly survey’s index of investor optimism jumped 25 percent between January and February and stands at 184, well above its previous high of 171 in April.
Investors in the survey on average say they expect the stock market to climb by 14.9 percent in the next 12 months, well short of the more than 20 percent gains in recent years but still above historic annual returns of about 11 percent. Optimism is especially strong among female investors.
Investor enthusiasm has been good news for brokerage stocks. On Monday, E*Trade Group, a leading on-line broker, jumped $8.44, to $48.56, on speculation that Goldman Sachs might acquire the company. AmeriTrade Holding, an E*Trade competitor, rose $18.25, to $104.25.
Merrill Lynch added $3.37, to $75.75, after the firm said it plans to acquire the Internet technology division of a small brokerage firm, D.E. Shaw.
Global outlook: The decision by the world’s leading finance ministers to say nothing about the recent weakening of the yen and the euro suggest that the U.S. economy and financial markets will continue to outshine their principal competitors in Europe and Japan, said David Mead, chief investment officer at Chicago’s Harris Bank.
After the weekend finance summit in Bonn, Mead said he is bullish about the prospect for European investment in the long run but cautious over the next several months.
Calls for lower interest rates in Europe to fight recession likely will go unanswered, at least for a while, he said. “You must keep in mind that the fellow now in charge of the European Central Bank (Wim Duisenberg) got that position because he is an ardent inflation-fighter,” Mead said.
“There is no euro weakness. I don’t believe it,” Duisenberg said Monday in Stuttgart, Germany. Rather, he said, the U.S. dollar is temporarily strong.
The recent uptick in long-term U.S. interest rates drew international money into U.S. stocks and bonds, which will likely continue as Japan, the United Kingdom and Germany cope with disappointing economies, Mead said.
Treasury auction: The Treasury’s weekly auction of 3- and 6-month bills brought a rate of 4.53 percent on 3-month bills, up from 4.44 percent last week, and 4.43 percent on 6-month bills, down from 4.47 percent last week.
Local news: Dean Foods, Franklin Park, added 75 cents, to $34.75, after an analyst at CS First Boston issued a “strong buy” rating on the stock. On Friday, Dean Foods slipped to a 52-week low after it said profits for its fiscal third quarter, which will end Sunday, would be well below Wall Street estimates.
– Ha-Lo Industries, Niles, a vendor of promotional materials that has suffered in the stock market recently, added $1, to $11.56. CEO Lou Weisbach said the company expects to achieve record sales and profits in 1999.
– Stockholders of ABC Rail Products, Chicago, and privately held NACO, based in Downers Grove, approved the merger of the two rail products manufacturers. The new company is called ABC-NACO Inc.
