In a reprise of the trading pattern from earlier this year, technology stocks advanced Tuesday, while other sectors slumped.
The Nasdaq composite index closed above 4000 for the first time since April 11. Share volume picked up in the New York Stock Exchange and Nasdaq stock market.
The Dow Jones industrial average wiped out Monday’s 108-point gain with a loss of 122.68, or 1.2 percent. NYSE volume totaled 1.02 billion shares.
Gains by Microsoft and Intel failed to overcome losses by such blue chips as General Motors, Honeywell and International Business Machines.
The Nasdaq composite index added 23.53, to 4013.36, although Nasdaq losers held a slight edge over winners. Nasdaq volume totaled 1.69 billion shares.
Business software developer Oracle posted better-than-expected results for its fiscal fourth quarter. But share prices fell in after-hours trading as some investors, noting Oracle’s steady gains since mid-May, decided to sell on the news.
In the commodity markets, crude oil rose $1.36 a barrel, to $33.05, the highest level since March 7, ahead of Wednesday’s meeting of OPEC officials.
The third rail: Democratic presidential candidate Al Gore, better late than never, issued his proposal for stimulating retirement savings. Gore will have a hard time convincing voters that he is not simply playing catch-up with a Social Security proposal issued earlier by Republican contender George W. Bush.
Gore’s proposal represents a new government program, in effect, to subsidize individual savings and investment, presumably in the stock market. It’s a sort of 401(k) plan with the government, instead of an employer, providing a matching grant.
Gore’s plan does not address Social Security, a program that has been called the third rail of American politics because of the hazard politicians face in touching it.
Bush’s plan, by contrast, seeks to revamp Social Security by partially dismantling the system–a goal long sought by conservatives–and diverting part of the payroll tax into individually managed retirement accounts.
Bush’s plan is popular among wealthier, younger Americans who lack confidence in future Social Security benefits and, until recently, were enjoying historic gains in stocks.
Bush and Gore have framed the elements for an interesting debate, but neither side has found the secret for boosting overall savings.
Gore would increase personal saving by increasing federal spending paid for by taxpayers. Bush would increase personal saving by bleeding Social Security. Both trade-offs are highly dubious.
The proposals are sailing on the tail wind of the bull market in stocks. Without five consecutive years of 20 percent gains and more in the S&P 500 index, programs to subsidize stock market investing as a benefit to Americans in their retirement years would never materialize in political discourse.
American participation in the stock market has never been broader, reflecting higher incomes, general optimism and willingness to take risks among a large segment of the public. The same factors have boosted consumption, leaving the savings rate at its low level.
There is no reason to believe that Americans currently not involved, or minimally involved, in the stock market would be prompted to buy shares by either the Gore or Bush plan.
Rather, participants in either plan would likely place their money into the same risk-averse savings–including Treasury securities–that the Social Security system already holds in the interim between payroll tax collections and payments to beneficiaries.
In terms of the nation’s balance sheet, it’s hard to find a net increase in savings in either plan.
Local news: Morgan Stanley Dean Witter initiated research coverage of post-secondary education provider DeVry, Oakbrook Terrace, with an “outperform” rating and a 12-month price target of $36. Shares edged up 6 cents, to $28.94.
– Chicago-based paper products manufacturer Smurfit-Stone Container closed unchanged, at $12.75, after hitting a 52-week low of $12.12 during the session. The company said it will tax a pretax charge in connection with closing a containerboard plant.
