Stocks Rally as Interest Rates Decline : Dow Index Gains 9.63 to Close at Record High
The stock market rallied with renewed force Friday, hitting new record highs with a push from lower interest rates.
The Dow Jones average of 30 industrials rose 9.63 to 1,315.41, topping the previous peak of 1,309.70 reached on May 21. For the week, the average gained 13.44 points.
Volume on the New York Stock Exchange stepped up to 134.14 million shares from 108.76 million on Thursday.
Before the market opened, the Commerce Department reported that new factory orders fell 0.5% in April. The drop came after revised declines of 0.7% in March and 1.1% in February.
However, that fresh evidence of sluggishness in business activity helped touch off a drop in interest rates--and a rise in bond prices--in the credit markets. Prices of long-term government bonds moved up more than $10 for every $1,000 in face value.
Analysts also said that traders were encouraged by the steady showing of International Business Machines’ stock despite the company’s projection of slightly lower earnings for the second quarter. IBM also said it is still looking for a strong showing in the second half of the year.
Airline Issues Strong
As a prominent blue-chip issue and the No. 1 holding of investing institutions, IBM can sometimes set the tone for the market as a whole. After falling a fraction in early trading, it climbed to 128 7/8, up 7/8 from Thursday’s close.
Among other actively traded blue chips, American Telephone & Telegraph rose 3/8 to 23, and Sears, Roebuck gained 5/8 to 38 5/8.
Airline stocks were strong and energy issues mixed amid talk of new downward pressure on oil prices. UAL, which also got a recommendation from a brokerage house, gained 4 to 53 5/8; AMR was up 2 3/8 to 47 5/8, and Delta rose 1 to 48.
On the downside, Black & Decker fell 2 1/8 to 20 1/2. The company said its sales and earnings for the current fiscal quarter will be lower than previously projected.
In the daily tally on the Big Board, advancing issues outnumbered declines by nearly two to one.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 162.43 million shares.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,573, compared to 2,229 on Thursday.
Bond prices pulled back late Thursday after the Federal Reserve reported a larger-than-expected $4.5-billion increase in the nation’s basic money supply.
Some analysts said the rise may make it more difficult for the Fed to ease credit conditions further. But others said the Fed will probably overlook the rapid money growth as it tries to stimulate economic growth.
In the secondary market for Treasury bonds, prices of short-term governments rose point, intermediate maturities were up between 1/2 point and a full point and long-term issues were up as much as 16/32 point, according to the investment firm of Salomon Bros. The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.