Investors Stick to Big Names in Quarter
By ROBERT D. HERSHEY Jr.
04/01/99
The New York Times
Page 8, Column 1
In its final sprint to the 10,000 mark, a peak once scarcely imagined, the Dow Jones industrial average showed that stock market investors intensified what had already seemed an inexhaustible preference for the biggest and best.
''It was all the big names -- the big caps,'' said Alfred E. Goldman, chief market strategist at A. G. Edwards in St. Louis, in reviewing the first three months of 1999 yesterday, as managers finished dressing their portfolios for client inspection. ''We're in a very selective market, so the deal is, you've got to buy the big-name stocks.''
Yesterday's action, however, was not entirely a matter of professionals adding recent winners and shedding losers, since the market suffered a late sinking spell that pushed the Dow 127.1 points lower to pare its gain for the quarter to 6.6 percent.
The Standard & Poor's 500, also dominated by large companies, lost a proportionally similar amount to finish the quarter ahead by 4.6 percent.
It was the first time since the final quarter of 1996 that the Dow beat the S.& P., and it did so despite a 35 percent skid by Philip Morris Companies. Much of that slide came this week after an Oregon jury ordered the company to pay $81 million in damages to the family of a Marlboro smoker who died of cancer.
By contrast, Standard & Poor's indexes of medium-sized and small companies slumped 7 percent and 9 percent, respectively.
''You still have the large-capitalization, global growth companies leading the market and still have the narrowness that prevailed last year,'' said Timothy E. O'Grady, senior portfolio manager for First Capital Group in Morristown, N.J.
Software, computer and many other high-technology companies also sparkled, with Microsoft rising 29 percent, to finish at $89.625, where its total value surpassed $450 billion, 25 percent more than the No. 2 General Electric.
The Nasdaq market, which is heavily weighted with technology, spurted 12 percent over the winter, with CMGI, which develops and operates Internet and direct marketing companies, soaring 244 percent to finish at $183.0625. Amazon.com, the Internet bookseller, jumped 61 percent, to $172.1875, to surpass the price of Yahoo, the leading Internet search directory, at $168.375, up 42 percent for the quarter.
Joining the high-technology winners were brokerage houses, airlines and various retailers, beneficiaries of continued avid consumer spending that itself is partly fueled by rising stock prices.
Citigroup posted the biggest gain among Dow stocks -- although it was not the biggest contributor to the average's 605-point gain -- as it climbed 29 percent, to $63.875, more than double its low of last October when foreign economic turmoil was its most intense.
Charles Schwab & Company and Donaldson, Lufkin & Jenrette paced a giant run-up in brokerage firm stocks, which were badly battered last year. Each of them rebounded 70 percent during the latest quarter. Morgan Stanley Dean Witter climbed 41 percent, Lehman Brothers and Merrill Lynch & Company by about one-third and Bear, Stearns & Company by 25 percent.
Airlines, aided by low fuel prices, as well as free-spending travelers, were led by Delta and Southwest, each up 33 percent, and UAL, which rose 30 percent. AMR, which experienced a 10-day sickout by its pilots, and U S Airways, however, edged lower.
Among retailers, Consolidated Stores, up 50 percent, and Dollar General, up 44 percent, posted some of the biggest gains. Wal-Mart Stores Inc., the No. 1 retailer, gained 13 percent to push its market capitalization -- what it would theoretically cost to buy every share -- above the $200 billion level.
Drug stocks were mixed, with American Home Products 16 percent higher, Pfizer up 11 percent and Merck up 9 percent. Abbott, Bristol-Myers and Eli Lilly all lost between 4 and 5 percent, while Warner-Lambert, maker of the controversial diabetes drug Rezulin, lost 12 percent.
Utilities weakened as interest rates crept higher, with the S. & P. utility index falling 10 percent. Nonetheless, there was little sign of faster inflation, and precious metals turned in another poor performance, with the Philadelphia gold and silver index slipping 8 percent.
Looking ahead, the Dow after millenary milestones has advanced in the following quarter on two of every three occasions, and has also done better than other market indexes. Its biggest rise was 12.5 percent after the average hit 6,000 in late 1996, according to LIM Research.com. The biggest loss was 1.2 percent in the quarter following the Dow's July 1997 surge to 8,000.
The research company also noted that the Russell 2000 underperformed the general market in the quarter following seven of the last eight 1,000-point milestones.
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