Newspaper article The Christian Science Monitor

Blue-Chip Stocks Gain from Rate Cut

Newspaper article The Christian Science Monitor

Blue-Chip Stocks Gain from Rate Cut

Article excerpt

INTEREST-RATE sensitive stocks - many of them major blue-chip companies listed on the New York Stock Exchange - are suddenly showing exceptional year-end muscle, thanks to recent rate reductions undertaken by the Federal Reserve Board.

Throw darts at a board listing most blue-chip stocks and "you'll probably hit 15 or more sectors that now look very promising," says Dennis Jarrett, a market analyst with Kidder, Peabody & Co. "Today's stock market environment is tough to discern," because of the many weaknesses in the underlying economy, Mr. Jarrett says. Yet it is clear that stocks related to interest rates, such as banking and some manufacturing firms, are being acquired by both institutional investors and individuals.

Smaller-capitalization companies - so-called "secondary stocks have not been showing growth commensurate with the larger blue-chip companies in recent trading sessions. Market gains now primarily involve the bigger "large-capitalization stocks," Jarrett says.

"The stock market has been looking pretty good in recent trading days," says Hildegard Zagorsky, an analyst with Prudential Securities Inc. "There's room for additional growth, although we've gone a long way in a very short space of time." That means a market correction is possible, Ms. Zagorski says. On Dec. 24, for example, the market shot up to 3,050.98 on the Dow Jones industrial average - close to the market's previous high of 3,077.15 points on Oct. 18, 1991.

One possible boost in the days ahead: Smaller-cap stocks usually show strength in January, following tax-related selling in December.

Still, for now, the larger blue-chip firms remain dominant within the market. What's driving the market, say analysts here, are improvements in a number of key sectors throughout the United States economy. Among companies showing recent market strength are Alcoa, Illinois Tool Works, General Electric, International Paper, and UAL Corporation, the parent company of United Airlines. …

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