COMMENTARY

A generally upbeat week in the financial markets, in which U.S. stocks rose to

all-time highs. The Standard & Poor's 500-stock index, NASDAQ Composite index

and Dow Jones industrial average all climbed to record levels on May 27. The

Dow climbed 38 points to 7383. The rally was sparked by computer stocks,

notably IBM. AT&T also rallied on word that the company was involved in merger

talks. But bonds were not so vibrant. Thirty-year bond yields climbed above 7%

on May 28, causing a sell-off in stocks.

      
                                                  % change
      U.S. MARKETS                      Latest      Week    Year
      Dow Jones Industrials              7357.2      0.9     28.9
      NASDAQ Combined Composite          1410.2      2.7     14.1
      S&P MidCap 400                      277.3      1.8     15.4
      S&P SmallCap 600                    153.8      2.3     10.2
      S&P SuperComposite 1500             181.2      1.1     24.2
      
                                                     % change
      SECTORS                             Latest    Week    Year
      Bloomberg Information Age           267.6      3.4     26.8
      S&P Financials                       93.4      0.0     39.1
      S&P Utilities                       191.7      0.1     -1.7
      PSE Technology                      286.6      3.9     28.7
      
                                                      % change
      FOREIGN MARKETS                    Latest      Week    Year
      London (FT-SE 100)                 4677.5      0.8     24.4
      Frankfurt (DAX)                    3636.4      1.1     42.1
      Tokyo (NIKKEI 225)               20,351.3      2.6     -7.3
      Hong Kong (Hang Seng)            14,556.5      2.3     31.1
      Toronto (TSE 300)                  6389.0      1.3     22.4
      Mexico City (IPC)                  3906.3     -1.7     17.8
      
                                                    Week    Year
      FUNDAMENTALS                        Latest    ago      ago
      S&P 500 Dividend Yield               1.75%    1.77%    2.09%
      S&P 500 P/E Ratio (Last 12 mos.)     21.4     21.3     19.7
      S&P 500 P/E Ratio (Next 12 mos.)*    17.6     17.5       NA
      First Call Earnings Revision*       -0.73%   -1.03%      NA
      
                                                   Week
      TECHNICAL INDICATORS                Latest    ago     Reading
      S&P 500 200-day average             747.7    744.1    Positive
      Stocks above 200-day average         70.0%    66.0%   Neutral
      Options: Put/call ratio              0.47     0.57    Negative
      Insiders: Vickers Sell/buy ratio     1.33     1.43    Positive
      
                                          Latest    Week     Year
      KEY RATES                            week%    ago%     ago%
      MONEY MARKET FUNDS                   5.14     5.12     4.85
      90-DAY TREASURY BILLS                5.12     5.11     5.17
      6-MONTH BANK CDS                     5.23     5.23     4.91
      1-YEAR TREASURY BILLS                5.86     5.76     5.63
      10-YEAR TREASURY NOTES               6.79     6.72     6.67
      30-YEAR TREASURY BONDS               7.03     6.96     6.85
      LONG-TERM AA INDUSTRIALS             7.56     7.49     7.41
      LONG-TERM BBB INDUSTRIALS            7.93     7.90     7.80
      LONG-TERM AA TELEPHONES              7.78     7.71     7.66
      
      BEST-PERFORMING         Last                           Last 12
      GROUPS                 month%                          months%
      Communications Equip.   31.8    Semiconductors          78.7
      Oil & Gas Drilling      22.9    Savings & Loans         58.6
      Computer Systems        19.2    Computer Software       54.9
      Broadcasting            18.8    Invest. Banking/Brkrge. 52.4
      Shoes                   17.8    Household Products      50.5
      
      WORST-PERFORMING        Last                          Last 12
      GROUPS                 month%                         months%
      Restaurants            -0.64    Gold                  -27.39
      Engineering & Constr.  -0.37    Engineering & Constr. -18.31
      Transportation Svcs.     1.0    Defense Electronics    -8.14
      Food Wholesalers         2.7    Broadcasting           -6.23
      Food Chains              3.0    Specialty Printing     -6.14
      
      BLOOMBERG MONEY FLOW ANALYSIS
      Rebound ahead?  Stocks with most                      1-month
      significant buying on price weakness      Price      change
      Giddings & Lewis                         19  5/16    -1  3/64
      Wells Fargo                             258  1/4     -1
      McDonalds                                51  1/2     -   1/4
      Union Carbide                            47  3/8     -   5/8
      CVS                                      47  5/8     -1
      PacifiCare Health Systems A              72  3/8     -   1/4
      
      Decline ahead?  Stocks with most                    1-month
      significant selling on price strength     Price      change
      Microsoft                               126  5/8     11  3/4
      Cisco Systems                            68  3/4     22  1/4
      3Com                                     46  3/4     18  1/2
      Dell Computer                           113  1/4     34  5/16
      Intel                                   169 5/16     22 15/16
      WorldCom                                 26           3   3/4
      
      BLOOMBERG MUNI YIELD EQUIVALENTS
      Taxable equivalent yields on AAA-rated, tax-exempt municipal bonds,
      assuming a 31% federal tax rate.
                                    10-yr. bond        30-yr.  bond
                                  Latest    Last      Latest   Last
                                  week      week       week    week
      GENERAL OBLIGATIONS         4.93%     4.91%      5.52%    5.50%
      PERCENT OF TREASURIES      72.63     73.04      78.57    79.05
      TAXABLE EQUIVALENT          7.14      7.12       8.00     7.97
      INSURED REVENUE BONDS       5.06      5.05       5.71     5.70
      PERCENT OF TREASURIES      74.54     75.12      81.27    81.92
      TAXABLE EQUIVALENT          7.33      7.32       8.28     8.26
      
      EQUITY FUNDS
      Leaders                                 Laggards
      Four-week total                return%  Four-week total          return%
      Amerindo Technology D           31.4    Prudent Bear                -8.2
      Van Wagoner Post-Venture        25.6    Rydex Ursa                  -6.0
      Interactive Inv. Tech Value     25.0    Comstock Part. Cap Val. A   -4.6
      VanWagonerEmergingGrowth        24.0    Calvert New Africa A        -2.8
      Pin Oak Aggressive Stock        23.6    American Heritage           -2.4
      
      Leaders                                 Laggards
      52-week total return               %    52-week total return          %
      Morgan Stan. Inst. Lat. Am. A   46.1    United Svcs. Gold Shares   -45.6
      Rydex OTC                       45.9    Steadman Technology Grth.  -42.2
      Morgan Stanley Latin Amer. A    44.9    Perkins Opportunity        -41.0
      Legg Mason Value Primary        44.6    Bull & Bear Gold Investors -36.5
      Fidelity Sel. Electronics       44.3    Dreyfus Aggressive Growth  -34.7
      
      EQUITY FUND CATEGORIES
      Leaders                                 Laggards
      Four-week total return             %    Four-week total return       %
      Technology                      16.1    Real Estate                  3.0
      Small-cap Growth                14.4    Diversified Emerging Mkts.   3.4
      Japan                           11.0    Utilities                    3.9
      Mid-cap Growth                  11.0    International Hybrid         4.0
      Small-cap Blend                 10.4    Precious Metals              4.4
      
      Leaders                                 Laggards
      52-week total                 return%   52-week total return         %
      Financial                       33.8    Precious Metals            -25.9
      Real Estate                     28.8    Japan                       -9.1
      Latin America                   28.7    Small-cap Growth            -7.9
      Europe                          22.8    Diversified Pacific/Asia     0.4
      Large-cap Blend                 22.5    Communications               2.2
      
      All data are as of market close Wednesday, May 28, 1997, unless otherwise 
      indicated. Industry groups include S&P 500 companies only.  Fundamentals, 
      technical indicators, Bloomberg money flow analysis, and mutual fund returns 
      are as of May 27. For a more detailed explanation, write to us or E-mail 
      figures@businessweek.com.  NA=Not available  **Vanguard Index 500 Fund
      
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