So-called old economy stocks posted broad gains in moderate trading Monday, as the latest report from the nation’s corporate purchasing managers generated optimism that the economy has bottomed.
Even diversified manufacturer Minnesota Mining and Manufacturing, which issued a profit warning early Monday, rallied, adding $3.16, to $117.26.
It led the gainers in the Dow Jones industrial average, which advanced 91.32, to 10,593.72. Other Dow winners included Caterpillar, General Electric and International Business Machines.
New York Stock Exchange volume reached 1.11 billion shares, as winning stocks held a narrow edge over losers.
Basic-industry stocks were aided by a sharp fall in oil prices in New York futures trading. Crude oil for August delivery dropped 30 cents a barrel, to $25.95. Traders said they expect Iraq to resume oil exports after a dispute with the UN.
Blue-chip industrials have stabilized in recent days from declines posted for much of June. But analysts said risks lie ahead.
Friday’s report on June job growth and the next round of quarterly financial reports and outlooks threaten to generate more pessimism. Predictions of a profit resurgence or turnaround in the U.S. economy could be premature.
Analysts noted that Monday’s report by the National Association of Purchasing Management showed continued weakness in hiring.
Moreover, current corporate profit warnings are emphasizing weak economic conditions in Europe, which could impede a profit recovery for many multinationals.
After the close of New York trading, chemicals giant DuPont fell in after-hours trading. The company warned that second-quarter results would fall well short of Wall Street estimates.
“The global economic slowdown that has forced U.S. manufacturing capacity utilization to levels equal to the 1982 recession is now expanding to Europe, South America and parts of Asia,” DuPont Chief Executive Charles Holliday said in a statement. “Demand is correspondingly weak across all markets.”
Echoing a rising outcry from American business, Holliday added, “The strength of the U.S. dollar–at its highest point in 15 years–presents huge competitive challenges for U.S. exporters.”
The Nasdaq composite index lost 11.82, to 2148.72, on thin Nasdaq volume of 1.51 billion shares. Nasdaq losers topped winners by more than 4-3.
The Russell 2000 index of small-company stocks dropped 14.25, or 2.8 percent, to 498.39.
Treasury securities rallied, despite the much stronger-than-expected purchasing managers’ report. Traders said bonds were rebounding from a bout of selling at the end of the second quarter.
More heat: Stock analysts–already under pressure from Congress, the Securities and Exchange Commission and the attorney general of New York for selling out investor interests–faced new pressure Monday from the self-regulatory arm of the brokerage business.
The National Association of Securities Dealers proposed that analysts disclose potential conflicts of interest when making public appearances, including television interviews.
The NASD also called for more conflict of interest disclosure in brokerage firm advertisements and analyst reports.
“When an individual speaks authoritatively in recommending a security, it is essential that the listening audience fully understand the stake that the person, or their employer, has in that security,” Mary Schapiro, president of NASD’s regulation unit, said in a statement.
Cable financial channels typically present written rules to guests regarding conflicts of interest. But program anchors rarely require guests to recite on air the positions they or their firms hold in a security.
In the wake of the tech stock debacle, investors learned that many analysts touting shares were being paid to generate underwriting business in the same stocks.
A comment period lasts until Aug. 15.
Treasury auction: Interest rates rose at the weekly auction of 3- and 6-month Treasury bills. The discount rate on 3-month bills was 3.58 percent, up from 3.37 percent a week ago. The rate for 6-month bills was 3.50 percent, up from 3.34 percent. The coupon-equivalent yields at Monday’s auction were 3.66 percent for 3-month bills and 3.61 percent for 6-month bills.
