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The Daily Dow LEXINGTON, KY. (November 14) -- The Dow's winning streak extended to nine sessions today (the last seven of which marked record highs) and closed above 6300. Partly responsible for today's continued celebration for Blue Chips was the release of Consumer Price Index numbers right in line with expectations.
The market read the report as further evidence that while the economy continues to grow modestly, inflation is under control and interest rates are relatively low. Those are the two real threats to the growing economy and as long as they stay benign, it's likely that the equity markets will be reasonably stable.
As I mentioned last week, one measure of the market's relative value is the Price/Earnings ratio for the entire Dow, measured against next year's estimated earnings. According to First Call, next year's consensus estimate for the index is $431.40. With the Dow at 6300, that's only a multiple of 14.6. In a low-interest, tame inflation environment, most analysts would agree that such a level isn't out of line.
Another item to check is the progression of those consensus estimates. Four weeks ago, the Dow estimate was $428.86, so the estimates are rising rather than falling, another good sign.
In company news today, DuPont announced that it expects to cut 2,850 jobs over the next three or four years as part of a restructuring plan in its nylon-fiber business. The ultimate goal is to slash costs by $700 million a year over the next five years in order to boost returns to a level "well over" the cost of capital. DuPont said the renewal effort "will more than double the shareholder value of the business by 2002." That sounds good on the surface, but will shareholders be happy with a 12% growth rate over the next six years? Frankly, that's not setting the bar very high.
Today's Dow Numbers Stock Change Bid ------------------- DD - 15/16 92.00 CHV + 5/8 66.00 MMM +1 1/8 81.75 EK --- 83.38 IMN + 3/4 29.00
Day Month Year History
FOOL-4 +0.44% 2.57% 29.76% 29.76%
DJIA +0.62% 4.70% 23.37% 23.37%
S&P 500 +0.65% 4.34% 19.47% 19.47%
NASDAQ +0.76% 4.00% 20.74% 20.74%
Rec'd # Security In At Now Change
1/2/96 142 DuPont 69.88 92.00 31.66%
1/2/96 149 3M 63.76 81.75 28.22%
1/2/96 380 Chevron 52.38 66.00 26.01%
1/2/96 148 E. Kodak 67.00 83.38 24.44%
7/16/96 14 Imation 26.16 29.00 10.87%
Rec'd # Security In At Value Change
1/2/96 380 Chevron 19902.50 25080.00 $5177.50
1/2/96 142 DuPont 9922.25 13064.00 $3141.75
1/2/96 149 3M 9500.09 12180.75 $2680.66
1/2/96 148 E. Kodak 9916.00 12339.50 $2423.50
7/16/96 14 Imation 366.21 406.00 $39.79
CASH $1810.64
TOTAL $64880.89
Transmitted: 11/14/96 5:16
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