Stocks Advance on Heavy Volume : Blue Chips Miss Rally; Dow Off 3.75
The stock market extended its advance Tuesday despite receiving little help from its blue chips. Trading was heavy as volume surpassed 155 million shares.
Stocks drew some support from the spread of a quarter-point cut to 10 1/2% in the prime lending rates of major banks, although the move was widely expected.
Several banks also posted improved fourth-quarter results, which bolstered their share prices.
Oil and drug stocks also advanced.
The Dow Jones average of 30 industrials slipped 3.75 to 1,230.79 after struggling to stay in plus territory throughout the session. The measure had jumped 49.58 points over the six previous sessions.
The Dow Jones transportation and utility averages rose moderately, however, as did most other key market indexes.
Gainers led losers by about five to three among all New York Stock Exchange-listed issues, and 177 stocks hit 52-week highs. The NYSE composite index rose 0.21 to 98.59.
Big Board volume swelled to 155.26 million shares--the eighth highest on record and up from 124.88 million in the previous session. Tuesday’s first-hour volume of 51.57 million shares was the fifth highest ever.
The reduction in the prime rate by the nation’s largest banks, including industry leader Bank of America in San Francisco, matched the cut initiated Monday by Manufacturers Hanover Trust Co. in New York.
The reduction pushed the prime rate to its lowest level in 17 months and reflects earlier declines in money market rates, which determine the banks’ cost of obtaining funds.
Decline in Interest Rates
Federal Reserve Chairman Paul A. Volcker said interest rates probably would decline further if Congress passes a budget-deficit reduction plan that starts with a $50-billion cut in the first year and includes “some follow through” in the future.
The decline in rates has fueled Wall Street’s optimism about the economy, although the government Tuesday reported mixed signals about economic activity in December, saying retail sales slipped 0.1% and industrial production rose 0.6%.
Regardless, the pullback in the Dow Jones industrial average was normal as investors cashed in on the blue chips’ recent surge, said Andrew Schaefer, equity trader for Smith Barney, Harris Upham & Co.
More encouraging, he said, was the continued dominance of advancing issues over declines in the overall market, indicating a widening enthusiasm among investors for stocks in general.
Contributing to the heavy volume were two large-block trades in Gulf & Western, which rose 3/4 to 29 3/4. The blocks--1.13 million shares and 1.8 million shares--both crossed at 29.
American Telephone & Telegraph topped the NYSE’s active list, however, losing to 20 1/2 as 3.66 million shares changed hands.
Among other blue chips, International Business Machines slipped 1/8 to 124 5/8, General Motors rose 1/8 to 81 1/8 and General Electric lost to 59.
Bank Issues Up
In the banking sector, Citicorp gained 1/2 to 40, J. P. Morgan jumped 1 to 82 1/2, Chase Manhattan rose 3/4 to 49 and BankAmerica was up 3/8 at 18 1/2.
Firestone Tire & Rubber rose to 18 1/2; a 723,400-share block traded at 18 3/8.
On the downside, Western Union tumbled 1 1/8 to 7.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 182.63 million shares.
Standard & Poor’s index of 400 industrials rose 0.25 to 190.53, and S&P;’s 500-stock composite index was up 0.30 at 170.81.
At the American Stock Exchange, the market-value index rose 0.97 to 208.46.
The NASDAQ composite index for the over-the-counter market closed at 257.78, up 2.32.
The Wilshire index of 5,000 equities closed at 1,745.376, up 4.981.
Large blocks of 10,000 or more shares traded on the NYSE totaled 3,214, compared to 2,321 on Monday.
Bond prices advanced as a key short-term interest rate fell.
The federal funds rate, the interest on overnight loans between banks, rose to 8.125% from 8.0625% late Monday.
In the secondary market for Treasury bonds, prices of short-term governments rose 1/8 point to point, intermediate maturities rose point to 5/8 point and long-term issues were up 5/8 point, according to the investment firm of Salomon Bros. Inc.
The movement of a 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 rose 3/8 point in light trading.
