More news of low inflation and good company earnings triggered a rally in small stocks Wednesday, while the broad market’s gains were held in check by a last-minute bout of computer-assisted trading.
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The Nasdaq rose a whopping 9.76 points to 719.35. It was helped by shares of QVC, which jumped $6, to $42, after a bid for the company by Comcast, which fell $1.50, to $15.12. The bid derailed the planned merger of QVC and CBS.
CBS shares rose $8, to $308, after initially falling nearly $10.
Even not counting QVC, technology stocks did well after several months of dreary performance.
Chipcom led the way, rising $7.25, to $46.75, on strong earnings that raised hopes for other computer-related stocks. The company reported it earned 54 cents a share for the second quarter, up from 24 cents a share a year earlier.
Seagate Technology rose $1.25, to $24.62, after the maker of computer disk drives said earnings for its fiscal fourth quarter ended July 1 rose to $1.07 a share from 48 cents a year earlier. Analysts surveyed by Zacks Investment Research expected earnings of 92 cents a share.
Shares of Intel rose $1.62, to $61.75, after Altera, which makes specialized integrated circuits, said it will acquire Intel’s programmable logic business for about $50 million in stock and cash. Altera rallied $3.25, to $32.
The day began with the Labor Department reporting that consumer prices inched up 0.3 percent in June, putting the annual rate for the first half of the year at a non-threatening 2.5 percent level.
The Dow Jones industrial average bounced up early on hopes the Federal Reserve Board may not jack up interest rates to squelch the non-existent inflation. There has been expectation that another increase could come right away if inflation numbers even flashed a caution light.
The report sent the yield on the benchmark 30-year Treasury bond to 7.67 percent, down from 7.68 percent at Tuesday’s close and the lowest yield this week. Higher rates make stocks less attractive compared with bonds and other fixed-income investments.
“The market is likely to work higher on the fact that inflation fears have been muted now for several months in a row,” said Alan Ackerman, market strategist at Reich & Co.
The generally upward march of long-term rates and continued flat inflation numbers have started to raise questions.
“Bond markets will come to their senses before the end of the year,” said a report by Lehman Brothers economists Jane Edwards and Giogrio Radelli. They predict a bond-market rally as traders decide inflation may not be around the corner after all.
After the markets closed, gourmet coffeemaker Starbucks, a Wall Street favorite, announced it will increase prices because of frost damage to Brazil’s coffee crop.
Heartland report: UAL, parent of Elk Grove Township-based United Airlines, may be getting a bad rap from investors, according to Kidder Peabody analyst Samuel Buttrick.
A day after UAL shareholders voted to sell the company to employees, Buttrick raised the company’s stock to “trading buy” from “neutral.” In a cheery assessment for the new owners, Buttrick said the current share price reflects a needlessly pessimistic view of the company.
UAL stock rose $4 on the first full day of trading after the vote, closing at $92.
Nalco Chemical of Naperville announced completion of the sale of a chemical business to PPG Industries for an undisclosed price. The unit, which produces chemicals used in painting of automobiles, has annual sales of about $10 million. The sale will result in a third-quarter gain of 4 cents a share after taxes, a Nalco spokesman said.
Envirodyne Industries of Oak Brook said a federal appeals court has affirmed previous court rulings confirming its reorganization plan. Some investors had sought to reverse a previous court finding approving the plan. The company emerged from bankruptcy last Dec. 31.