Drugs, Multinationals Pace Rally; Dow Up 5
The stock market posted a broad gain Wednesday in what analysts described as a technical rally.
Drug and other multinational issues were the day’s standout performers, responding to the sharp drop of the dollar in foreign exchange.
The Dow Jones average of 30 industrials, down 7.73 points over the week’s first two sessions, recovered 5.19 to 1,264.91.
Volume on the New York Stock Exchange stepped up to 101.04 million shares from 89.93 million on Tuesday.
Wall Street Impressed
Many Wall Streeters were impressed with the market’s relatively steady showing Tuesday in the face of disappointing earnings news from several blue-chip companies.
Analysts said traders also were heartened by some spotty declines in interest rates of late. Rates were mixed in the bond and short-term money markets Wednesday.
The dollar’s drop prompted enthusiastic buying of drug stocks, since major companies in that industry typically derive a third to a half of their revenues from foreign sales.
Any significant decline in the dollar against foreign currencies would stand to enhance the value of that business when stated in dollar numbers.
Pfizer climbed 1 1/8 to 43 1/2, Smithkline Beckman 1 3/4 to 62 1/2, Upjohn 1 to 78 7/8, Merck 1 1/2 to 104 5/8, Abbott Laboratories 1 to 52 5/8, Squibb 2 to 57 1/2 and American Home Products 1 1/8 to 62.
Applying the same logic to major international soft-drink stocks, buyers sent Coca-Cola up 1 at 69 and Pepsico up 2 at 53 to 52-week highs.
Unocal led the active list, up 7/8 at 47 5/8. A 7-million-share block traded at 48.
There was widespread speculation on Wall Street that a group led by T. Boone Pickens, chairman of Mesa Petroleum, was the buyer in the big transaction.
Energy Stocks Gain
Some other energy stocks also advanced. Royal Dutch Petroleum climbed 1 to 55 3/4 and Diamond Shamrock gained 1 1/2 to 19 1/2.
Dataproducts, traded on the American Stock Exchange, dropped 7/8 to 13 1/8. The company said it expects to report an earnings decline of more than 50% for the fiscal quarter that ends this weekend.
In the daily tally on the Big Board, about two issues rose in price for every one that lost ground. The exchange’s composite index gained 0.65 to 103.93.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 126.99 million shares.
Standard & Poor’s index of 400 industrials added 1.29 to 200.42 and S&P;’s 500-stock composite index was up 1.11 at 179.54.
The NASDAQ composite index for the over-the-counter market climbed 1.38 to 277.56.
At the American Stock Exchange, the market-value index closed at 225.98, up 1.57.
The Wilshire index of 5,000 equities closed at 1,847.309, up 11.360.
Large blocks of 10,000 or more shares traded on the NYSE totaled 1,959, compared to 1,761 on Tuesday.
The federal funds rate, the interest on overnight loans between banks, traded at 8.25%, up from 6% late Tuesday but down from 8.675% late last week. The rate’s steep slide Tuesday was not viewed as a sign of a major turning point for interest rates but rather as a technical fluke.
Bond Prices Lower
Bond prices mostly edged lower as the Treasury completed the second step of a three-part borrowing operation.
The Treasury said it sold $5.75 billion in seven-year notes at an average annual yield of 11.85%, the highest for such securities since the 12.34% of last October.
At the most recent auction of seven-year notes in December, the yield was 11.67%.
In the secondary market for Treasury bonds, prices of short-term governments edged up 1/32 point, intermediate maturities fell 7/32 point and long-term issues dropped 12/32 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 fell point in moderate trading.
Among tax-exempt municipal bonds, general obligations slipped 1/8 point and revenue bonds were little changed, Salomon Bros. said.
