Interest-Rate Drop Boosts Stocks; Dow Up 11
The stock market posted its third straight gain Wednesday with a broad advance encouraged by recent declines in interest rates.
Precious metals issues showed strength as gold rebounded from its depressed price.
The Dow Jones average of 30 industrials rose 11.04 to 1,202.74.
Volume on the New York Stock Exchange reached 99.23 million shares, against 92.11 million Tuesday.
Bond prices, which rise when interest rates fall, recorded healthy gains Monday and Tuesday. In Wednesday’s activity they turned mixed.
Meanwhile, the small Southwest Bank of St. Louis lowered its prime lending rate to 10 1/2% from 10 3/4%.
Brokers said there were expectations that large banks across the country might soon make similar reductions in their basic charge on loans to their blue-chip customers.
With interest rates coming down again, analysts said stock traders were growing more optimistic about the economic outlook for the months ahead.
In addition, lower interest rates diminish the competitive allure of bonds and other interest-bearing investments by comparison with stocks.
After falling 26.61 points in the first three sessions of 1985, the Dow Jones industrials have since recovered 17.78.
In the economic news, the Labor Department reported that the civilian unemployment rate rose a tenth of a percentage point to 7.2% in December. An increase of about that size had been widely predicted on Wall Street.
The gold price, which hit a 5 1/2-year low on Tuesday, climbed $7.50 an ounce to $304.20 on the Commodity Exchange in New York.
Among precious metals issues, ASA Ltd. picked up 1 3/4 to 47 7/8; Homestake Mining rose 1/2 to 21 3/8; Campbell Red Lake Mines rose 1/2 to 16 7/8, and Hecla Mining gained 1/2 to 14.
It was a much different story, however, for the stocks of several major producers of packaging materials after Great Northern Nekoosa cut its price of linerboard from $350 to $320 a ton.
Great Northern shares fell 1 1/2 to 32 3/4; Stone Container dropped 3 5/8 to 26 7/8; Temple-Inland fell 2 1/2 to 34 1/2, and Federal Paper Board fell 1 3/8 to 19 7/8.
Timken dropped 2 to 47 1/2, trading at its lowest prices since 1982. The company, which makes roller bearings, steel and other products, said it had sharply lower earnings in the fourth quarter of last year.
Northwest Industries lost 3 7/8 to 47 1/2 in trading that included a 400,000-share block at 48. Earlier this week the company said negotiations were continuing with a group that has proposed to buy it.
Advancing issues outnumbered declines by more than two to one on the Big Board.
The exchange’s composite index rose 0.63 to 95.44.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 120.70 million shares.
The Wilshire index of 5,000 equities closed at 1,687.045, up 11.126.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,114, compared to 1,831 on Tuesday.
Bond prices were mixed as short-term interest rates moved lower.
The closely watched federal funds rate--that charged on overnight loans between banks--fell to 8% from 8.5% late Tuesday.
In the secondary market for Treasury bonds, prices of short-term governments rose 3/32 point, but intermediate maturities were down 5/32 point and long-term issues were off 3/8 point, according to the investment firm of Salomon Bros. Inc.
The movement of a full point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
In corporate trading, industrials and utilities were off 1/8 point in quiet trading.
Among tax-exempt municipal bonds, general obligations rose 1/2 point while revenue bonds were off 3/8 point.
Yields on three-month Treasury bills fell 9 basis points--or one-hundredths of a percentage point--to 7.69%. Six-month bills fell 12 basis points to 7.88% and one-year bills were off 2 basis points at 8.29%.
Yields on 30-year Treasury bonds edged up to 11.51% from 11.46% late Tuesday.
