Stocks Rise as Bond Market Rally Sparks Optimism on Profit Growth

Strategic Insights -

A late-afternoon rally in the bond market Tuesday sparked optimism among investors, leading to a surge in stocks. The Dow Jones industrial average rose 70.25, or 0.8 percent, with Wal-Mart Stores Inc. leading the gain after reporting a stronger-than-forecast profit. The Standard & Poor's 500 also rose, led by Wal-Mart, up 1 5/8 to 52 3/4. The rally in the bond market is seen as a positive sign for profit growth, as lower interest rates make borrowing costs cheaper for companies and make stocks relatively more attractive than bonds. Several companies, including Young & Rubicam Inc. and Verio Inc., also saw gains in trading.

Key Takeaways:

  • The Dow Jones industrial average rose 70.25, or 0.8 percent, on Tuesday, with Wal-Mart Stores Inc. leading the gain.
  • The Standard & Poor's 500 also rose, led by Wal-Mart, up 1 5/8 to 52 3/4.
  • The rally in the bond market is seen as a positive sign for profit growth, as lower interest rates make borrowing costs cheaper for companies and make stocks relatively more attractive than bonds.
  • Young & Rubicam Inc. gained 3 1/16 to 28 1/16 in trading of 11.6 million shares, marking its first sale of stock.
  • Verio Inc., an Internet access company, rose 4 1/16 to 27 1/16 after its $126.5 million offering.
  • Several paper makers, including Jefferson Smurfit Corp. and Boise Cascade Corp., gained after Merrill Lynch & Co. raised its investment recommendation.
  • Jefferson Smurfit's plan to acquire Stone Container Corp. would create the world's largest paper-packaging company.

Sources:

  • Ariel Capital Management Inc.
  • The Dow Jones industrial average
  • The Standard & Poor's 500
  • Merrill Lynch & Co.
  • Jefferson Smurfit Corp.
  • Boise Cascade Corp.

Statistics:

  • The Dow Jones industrial average rose 70.25, or 0.8 percent.
  • The Standard & Poor's 500 rose, with Wal-Mart up 1 5/8 to 52 3/4.
  • Young & Rubicam Inc. traded 11.6 million shares, gaining 3 1/16 to 28 1/16.
  • Verio Inc. rose 4 1/16 to 27 1/16 after its $126.5 million offering.
  • $918 billion of mergers have been announced this year.
  • SBC Communications Inc. offered to buy Ameritech Corp. for $65.4 billion.
  • Nike Inc. rose 2 to 47 7/16 after unveiling a plan to improve working conditions at its factories.
  • The bond market's rally followed the sale of $10 billion of 3-year notes.
  • NationsBank Corp. rose 3 1/4 to 76 13/16, BankAmerica Corp. rose 3 1/4 to 85, and Citicorp gained 2 1/8 to 152 1/8.