The Dow surges past record 8000
By Brian Hale, New York
Australian Financial Review July 18/97
Weak inflation, falling bond yields, strong corporate
earnings and a renewed mania for technology shares
combined to slingshot Wall Street's sharemarkets to
records and the Dow Jones Industrial Average broke the
8000 barrier for the first time.
US financial experts still disagree widely about the
direction of the Australian and global sharemarkets from
this point, but Wednesday was a time for celebration, not
reflection.
An 8000-point level beckoned the Dow Jones Industrial
Average for a week after the blue-chip index crested at
7962 points on Wednesday a week ago then fell back to
7842 points before cautiously moving higher.
It finished on Tuesday at a record new base camp of
7975.71 before the final assault on a summit that seemed
unbelievable just three months ago. Several attempts to
stay above the new mark were thwarted in the morning
session. The US benchmark index finally stuck
consistently at the new altitude in the afternoon before
closing with a roar 63 points higher at almost 8038
points.
Some of its strength was a spin-off from the ebullient
NASDAQ screen-traded market which now trades
almost as much as the New York Stock Exchange.
NASDAQ's Composite Index, heavily influenced by
technology shares, has been on a tear for weeks and on
Wednesday celebrated its 10th successive record high
with a 38.52-point burst -- its biggest one-day point gain
ever -- to 1580.63 points to cement its longest
consecutive record run for more than 11 years.
The broader market-measuring S&P 500 index, also
influenced by tech stocks, similarly climbed to a new
all-time record high of 936.56 points and records
tumbled across the board as the NYSE index, the Russell
2,000 and a swag of other indices leapt to record levels.
The groundwork for the final assault on the market
records was laid by benign retail sales figures on Tuesday
and then, on Wednesday morning, a June consumer price
index gain of just 0.1 per cent for the fourth month in a
row. CPI growth through the first half of this year is
increasing at only a 1.4 per cent annual rate -- the lowest
in 11 years -- so the bond market dropped its
benchmark long bond yield below 6.5 per cent for the
first time this year.
With the bond market happy that the US Federal
Reserve will not lift interest rates and comparative yields
sinking, the sharemarkets took even more heart from the
flow of bumper quarterly profits being posted by US
companies as the second-quarter reporting season gets
under way.
NASDAQ also had its first chance to surf a wave of
optimism about technology shares that surged even more
in the wake of giant silicon chip-maker Intel's larger than
expected profits posted after the market closed the
previous day.
Intel's shares leapt another $US5 to about $US86 while
the shares of soft- ware bellwether Microsoft soared
another $US9 to $US148, each ahead of its Thursday
quarterly profit report. Household name technology
companies like Oracle, Dell and Sun Microsystems also
piled on further gains.
At the New York Stock Exchange, the Dow was surging
on its own rising tide of booming profit reports which was
strong enough to overcome the impact of a disastrous
earnings report from Eastman Kodak.
Kodak's share price fell $US8 on news that earnings
were well short of expectations. Its fall gave the Dow a
30-point handicap to overcome before it could score any
gains but it was a short-lived disadvantage, with stocks
like Boeing, General Electric, Procter & Gamble and
General Motors scoring solid rises.
America's biggest auto-maker headed another daily profit
parade with earnings that easily beat analysts' forecasts
although number two maker, Ford, lost ground although
its net profit of $US2.53 billion for the last three months
easily beat estimates of $US1.72 a share earnings by
US12¢.
Lucent Technologies, the telecommunications
equipment-making spin- off of Dow laggard AT&T,
added another $US6 to its share price after posting
almost-tripled profits of $US213 million and ITT Corp
rose more than $US5 after unveiling plans for a share
buyback and its second major restructuring in two years.
The Dow Industrials started the year at 6448 points and
breached the 7000 level in mid-February before a
March/April tumble that wiped out all earlier gains.
After bottoming in mid-April, the index began a startling
recovery that took it back over 7000 on the last day of
that month and into a 2-month rally that despite volatility
and some sharp falls culminated in yesterday's historic
milestone. |
