New York Market: The news is good and getting better

BIG companies have led the market higher for almost five years. Professional investors see no end to the trend. Money manager Cambridge Financial Group has been buying stocks such as Dell Computer (up 157 per cent in the past year), Lucent Technologies (up 82 per cent) and EMC Corp (up 268 per cent).

"We buy high and sell higher," said Buck Newsome, its president. "These trends will continue for quite a while."

Gains in big stocks such as Citigroup helped the Dow Jones Industrial Average add 3.5 per cent last week. The S&P 500 gained 4.2 per cent and the Nasdaq jumped 4 per cent.

The stocks gains are good news for bonds, boosting tax returns. The government has reduced its borrowings and the Treasury bond market is shrinking. Kevin Kennedy, at Citibank, forecasts bond yields will fall to 5.25 per cent in the six months from 5.45 per cent now.

Everything seems to be going right for stocks. Interest rates, already near historic lows, have been falling. Profits for S&P 500 companies are projected to grow a respectable 6 per cent in the first quarter. That would exceed the 3.8 per cent rise in the whole of 1998.

And the news keeps getting better. The European Central Bank cut interest rates by half a percentage point. The Dow rallied 112 points amid expectations that the cuts would help revive slowing European economies plus Asia and Latin America. "It sets the stage for greater growth going forward, and that's important," said Robert Morris, director of equity investment at Lord Abbett.

About 36 companies have announced earnings for 1999's first quarter. More report this week, including semiconductor maker Intel, newspaper publisher Gannett, International Paper and AlliedSignal.

Stocks may seem quite expensive, with the Dow average well above 10,000 and the Nasdaq up 18 per cent year to date. Yet with the average New York Stock Exchange and Nasdaq Composite stock down by about a third from its high, investors are finding bargains.

Most investors and analysts agree stocks are fraught with risk. The latest fear is that Nato air strikes in Serbia will undermine the confidence of US investors. "Historically, military conflicts have caused a temporary downturn because they increase uncertainty," said Byron Wien, a Morgan Stanley investment strategist.