FINANCIAL MARKETS : Tech Issues Take Dow to Peak

The Dow Jones industrial average bounced back Tuesday from a midday drop of more than 40 points to set its fifth consecutive record amid big gains in tech shares.

The Dow 30 closed up 7.22 points at 5,078.10. The New York Stock Exchange composite index and the Standard & Poor’s 500-stock index also finished at all-time highs.

“It’s been an amazing session,” said Ralph Bloch, chief technical analyst at Raymond James & Associates. “The techs exploded, and the strength in the sector broadened and clearly spilled over to the rest of the market.”

The Nasdaq Composite index, which is laced with high-technology stocks, climbed 20.73 points, or 2%, to 1,050.05.

Analysts said investors are again betting that Federal Reserve Board will cut interest rates--policy makers meet next month--and that the market got an added boost from the tech stocks rally.

Interest-rate speculation also affected the bond market. Treasury bond yields ended barely changed on Tuesday, reversing earlier increases after an auction of short-term securities attracted stronger-than-expected demand. The price of the Treasury’s main 30-year bond yield rose to 6.23% from 6.22% on Monday. Prices and yields move in opposite directions.

Analysts said the enthusiasm for stocks was fired by news that Goldman, Sachs & Co. had added Netscape Communications to its list of recommended stocks. This action came two weeks after the investment bank removed Microsoft from the list. Netscape, which fell recently, skyrocketed 20 to 131.

Related stocks also rose. Spyglass added 10 1/2 to 97, C-Cube was up 8 1/2 to 93 and Netcom rose 7 1/4 to 70 1/2. Microsoft was up 4 1/4 at 91 1/2.

“Goldman’s recommendation on Netscape turned all the techs around,” said Ned Collins, head of U.S. equities at Daiwa Securities.

The Dow 30 has gained more than 300 points in the last month, and many investors were looking at Tuesday’s early decline as just a temporary pause in that rally.

Meanwhile, Mexican stocks resumed their recent rally Tuesday, soaring on expectations of a fall in interest rates and short covering of Mexican equity by foreign investors. The Bolsa index charged through the 2,600 point barrier and ended up 60.68 points, or 2.38%, at 2,615.46.

Among market highlights:

* Retail stocks gained late in the afternoon after the release of the Johnson Redbook report, which said that sales in November rose over October. The Gap rose 1 at 50 7/8, and Dayton Hudson was ahead 1 1/4 at 73 3/4.

* IBM shares gained 1 1/4 to 97 1/8 after the company’s board of directors authorized the repurchase of an additional $2.5 billion in stock on top of a $5-billion buyback already announced.

* Baxter International surged 2 7/8 to 41 3/8 after the company said it plans to split its medical-technology business and its health-care cost management division into two publicly traded companies.

* Disney sparked the initial drop in stocks after it reported that earnings for the quarter ended Sept. 30 rose 17% to 264 million, or 50 cents a share. Those results only matched analysts’ expectations, leading investors to question whether companies can match the optimistic profit estimates for next year. Disney closed at 61 1/2, down 1 3/8.

In overseas trading, the 225-share Nikkei index in Tokyo gained 0.8%, and the DAX index in Frankfurt rose 0.2%. The FT-SE 100 index in London dipped by 0.005% from Monday’s record high.

Gold prices rose strongly on Tuesday for the second day as consumers and investors borrowed metal at soaring interest rates to cover short-term commitments. Jewelers, investors and miners selling future production often meet their immediate needs by borrowing gold, which they repay later in gold plus interest. A shortage of gold available for lending, however, has pushed rates to historic levels and spilled over into the bullion and futures markets.

December gold at New York’s Commodity Exchange ended up $3 an ounce at $387.90 after trading as high as $390.50. Bullion was quoted at $388.65, an unusual premium over the nearby futures contract. Trading was very heavy.