Stocks End 3-Session Losing Streak : Falling Interest Rates in Bond Market Cited; Dow Up 5.63
Stock prices staged a moderate advance Monday, breaking a three-session losing streak since the start of the new year.
The upswing was attributed in large measure to falling interest rates in the bond market.
The Dow Jones average of 30 industrials, down 24.61 points in the first three sessions of the year, climbed 5.63 to 1,190.59.
Volume on the New York Stock Exchange picked up to 86.19 million shares from 77.48 million Friday.
Prices of long-term government bonds, which move in the opposite direction from interest rates, rose more than $5 for every $1,000 in face value in the credit markets.
Analysts said the drop in rates was inspired partly by evidence of continued sluggishness in economic activity.
A monthly report issued over the weekend by a trade group of purchasing executives said rates of production and new orders fell in December. The National Assn. of Purchasing Management said new orders hit their lowest level in two years.
While that was negative news on the surface, brokers said it also suggested that there was room for further declines in interest rates. Lower rates would stand to improve the competitive allure of stocks in comparison to interest-bearing investments such as bonds.
At mid-session, the Dow Jones industrials showed a gain of more than 9 points before settling back toward the close.
Although the advance was relatively modest, Wall Streeters were relieved to see the market reverse its decline since New Year’s.
As Newton Zinder at E. F. Hutton & Co. pointed out, only once in the past 24 years did the market begin a year with three or more consecutive down days. In 1978, it fell in the first seven trading sessions.
Most Active Issues
Many investment advisory services had been looking for the arrival of the new year, accompanied by an easing of the Federal Reserve’s credit policy, to produce a rally. Now that things haven’t worked out that way, Zinder said, “it will be interesting to see how rapidly their opinion changes.”
Diamond Shamrock, down 1 at 20, and Occidental Petroleum, down 1 at 24, were the day’s two most-active Big Board issues. On Monday morning, the two companies announced a plan to merge. Then, after the market closed, they said the deal had been called off.
Teledyne fell 11 7/8 to 241 5/8. The company reported lower fourth-quarter earnings before special tax credits.
Advancing issues outnumbered declines by about five to three on the Big Board.
Large blocks of 10,000 or more shares traded on the NYSE totaled 1,602, compared to 1,532 on Friday.
Bond prices rose, with long-term Treasury issues climbing about 3/4 point, or $7.50, for each $1,000 in face value.
Yields on 30-year Treasury bonds fell to 11.54% from 11.63% on Friday.
Analysts said interest rates fell as doubts emerged about the strength of the economy.
In the secondary market for Treasury bonds, prices of short-term governments rose about 1/8 point, intermediate maturities were up between 1/8 point and 1/2 point and long-term issues rose 5/8 point to 3/4 point, according to the investment firm of Salomon Bros. Inc.
In corporate trading, industrials and utilities rose point in moderate trading.
Among tax-exempt municipal bonds, general obligations rose point in light trading and revenue bonds were up 1/2 point in moderate activity.
In the secondary market, yields on three-month Treasury bills ended the day unchanged from Friday’s levels at 7.79%. Six-month bills fell 8 basis points from Friday to 8.03%, and one-year bills were off 7 basis points at 8.34%. A basis point is one-hundredth of a percentage point.
The federal funds rate, the interest on overnight loans between banks, traded at 8.25%, up from 7.25% late Friday but well below the range that had prevailed for most of the previous week.
