COMMENTARY

A week of recovery and consolidation in the financial markets. The Dow Jones

industrial average, after dipping below 9000 on May 7, staged a rousing

comeback and closed above 9200 for the first time on May 13. U.S. stocks were

fueled by optimism that interest rates would remain low. Improved inflation

and retail sales reports, meanwhile, helped bond prices, which were on the

rise on May 12 as well. A drop in the yield of 30-year Treasury bonds below 6%

encouraged bond and stock investors.

      
                                                 % change
      U.S. MARKETS                 Latest      Week     Year
      Dow Jones Industrials        9211.8       1.7     26.4
      NASDAQ Combined Composite    1866.2       0.5     39.7
      S&P MidCap 400                372.7      -0.2     38.1
      S&P SmallCap 600              199.9      -0.4     34.9
      S&P SuperComposite 1500       239.6       1.1     34.3
      
                                               % change
      SECTORS                     Latest     Week      Year
      Bloomberg Information Age    352.3       1.1      39.1
      S&P Financials               133.7       1.1      40.9
      S&P Utilities                237.3      -0.7      22.4
      PSE Technology               361.8       0.9      34.4
      
                                                 % change
      FOREIGN MARKETS           Latest      Week          Year
      London (FT-SE 100)        5972.9      -0.3          27.4
      Frankfurt (DAX)           5376.9       2.8          50.5
      Tokyo (NIKKEI 225)      15,343.8       0.7         -24.1
      Hong Kong (Hang Seng)     9469.3      -6.3         -33.1
      Toronto (TSE 300)         7707.5       0.4          23.4
      Mexico City (IPC)         4756.6      -3.5          22.1
      
                                                         Week      Year
      FUNDAMENTALS                          Latest        ago       ago
      S&P 500 Dividend Yield                  1.40 %      1.40 %    1.78 %
      S&P 500 P/E Ratio (Last 12 mos.)        26.7        26.7      21.0
      S&P 500 P/E Ratio (Next 12 mos.)*       21.7        21.7      17.2
      First Call Earnings Revision*          -0.97 %     -1.01 %      NA
      
                                                         Week
      TECHNICAL INDICATORS                  Latest       ago       Reading
      S&P 500 200-day average                992.4       989.1     Positive
      Stocks above 200-day average            59.0 %      61.0 %   Neutral
      Options: Put/call ratio                 0.58        0.41     Negative
      Insiders: Vickers Sell/buy ratio        2.86        3.19     Positive
      
      BEST-PERFORMING            Last                                 Last 12
      GROUPS                     month%                               months%
      Computer Systems            25.4    Specialty Appar. Retailers   116.2
      Specialty Appar. Retailers  16.7    Broadcasting                  98.6
      Paper Containers            13.7    Homebuilding                  80.4
      Semiconductors              11.6    Personal Loans                73.6
      Defense Electronics         11.2    Communications Equip.         71.0
      
      WORST-PERFORMING           Last                             Last 12
      GROUPS                     month%                           months%
      Commercial Services        -12.7    Metals                  -37.7
      Invest. Banking/Brkrge.    -12.6    Gold Mining             -18.1
      Transportation Services    -10.4    Shoes                   -17.2
      Metals                      -9.8    Photography/Imaging     -14.4
      Tobacco                     -7.7    Engineering & Constr.   -13.8
      
      BLOOMBERG MONEY FLOW ANALYSIS
      Rebound ahead?  Stocks with most                            1-month
      significant buying on price weakness    Price               change
      Citicorp                                152 1/8           -10 3/16
      Chase Manhattan                         140 1/2            -5 7/8
      Oracle                                   26 1/16           -2 3/8
      BankAmerica                              85                -6 1/8
      AT&T                                     57 13/16          -6 1/2
      First Chicago NBD                        88 5/8            -7 5/8
      
      Decline ahead?  Stocks with most                            1-month
      significant selling on price strength   Price               change
      Dell Computer                            94 3/8            26 23/32
      Cisco Systems                            76 3/8             9 7/8
      Pfizer                                  111 13/16          10 11/16
      Infoseek                                 30 1/4             8 11/16
      Walt Disney                             118 13/16           8 9/16
      Washington Mutual                        73 25/64             45/64
      
      Data: Bloomberg Financial Markets; *First Call Corp.
      
                                   Latest       Week         Year
      KEY RATES                     week%       ago%         ago%
      MONEY MARKET FUNDS             5.10        5.09        5.11
      90-DAY TREASURY BILLS          5.11        5.11        5.19
      6-MONTH BANK CDS               5.09        5.07        5.23
      1-YEAR TREASURY BILLS          5.42        5.41        5.86
      10-YEAR TREASURY NOTES         5.67        5.67        6.68
      30-YEAR TREASURY BONDS         5.94        5.94        6.90
      LONG-TERM AA INDUSTRIALS       6.51        6.51        7.40
      LONG-TERM BBB INDUSTRIALS      6.94        6.97        7.85
      LONG-TERM AA TELEPHONES        6.78        6.78        7.64
      
      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       4.51%    4.52%     5.10%    5.11%
      PERCENT OF TREASURIES    79.52    80.00     85.86    86.03
      TAXABLE EQUIVALENT        6.54     6.55      7.39     7.41
      INSURED REVENUE BONDS     4.66     4.69      5.27     5.30
      PERCENT OF TREASURIES    82.17    83.01     88.72    89.23
      TAXABLE EQUIVALENT        6.75     6.80      7.64     7.68
      
      EQUITY FUNDS
      Leaders                             Laggards
      Four-week total return        %     Four-week total return          %
      IAI Value                   29.3    Matthews Korea I              -21.7
      American Heritage           14.8    Steadman Technology Grth.     -16.9
      Fidelity Sel. Computers     13.4    Montgomery Emerg. Asia R      -16.9
      Fidelity Sel. Energy Serv.   9.9    Invesco Asian Growth          -15.3
      Pin Oak Aggressive Stock     9.6    Colonial Newport Tiger B      -14.9
      
      Leaders                             Laggards
      52-week total return         %      52-week total return            %
      FMI Focus                   79.3    Matthews Korea I              -58.1
      Munder Micro-Cap Equity Y   78.6    U.S. Global Investors Gold    -55.4
      Weitz Hickory               76.9    Lex. Crosby Sm. Cap Asia      -55.2
      Delaware Aggressive Gr. A   75.4    Morgan Stan. Asian Grth. C    -52.2
      Texas Capital Val. & Grth.  72.8    Morg. Stan. Inst. Asia Eq. A  -52.1
      
      EQUITY FUND CATEGORIES
      Leaders                             Laggards
      Four-week total return        %     Four-week total return           %
      Technology                   3.1    Pacific/Asia ex-Japan         -10.1
      Natural Resources            1.0    Diversified Pacific/Asia       -7.8
      Europe                       0.8    Latin America                  -6.5
      Health                       0.3    Diversified Emerging Mkts.     -5.4
      Large-cap Growth             0.3    Japan                          -3.6
      
      Leaders                             Laggards
      52-week total return         %      52-week total return             %
      Communications              46.9    Pacific/Asia ex-Japan         -38.9
      Financial                   44.6    Diversified Pacific/Asia      -31.2
      Europe                      36.3    Precious Metals               -30.5
      Small-cap Blend             35.5    Japan                         -20.0
      Large-cap Growth            35.1    Diversified Emerging Mkts.    -13.1
      
      All data are as of market close Wednesday, May 13, 1998, 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 12. 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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