Blue Chips Set Pace as Market Rally Revives
Stock prices rallied late in Friday’s session, propelling the Dow Jones industrial average to a new high after a brief spell of profit taking.
Analysts said investors were buying steel, chemical and other basic-industry issues in anticipation of a pickup in economic activity in the months ahead.
The Dow Jones average of 30 industrials climbed 8.62 to 1,359.54, topping its previous closing peak of 1,357.97 reached Wednesday. For the week, the average posted a net gain of 20.94 points.
Volume on the New York Stock Exchange came to 114.83 million shares, against 131.35 million Thursday.
The session began on a hesitant note. But, when no concerted selling developed, prices began moving higher, with blue chips leading the way. By the end of the session, the advance broadened out considerably.
Analysts said some of the market’s strength stemmed from buying by investment firms completing complex transactions involving stock-index futures and options that expired at Friday’s close.
But they also observed that hopes have increased lately on Wall Street for a revival of economic growth after a sluggish showing since the middle of last year.
One reason for those hopes has been the recent strength of the stock market itself. The market has a longstanding reputation as a good forecaster of the direction of the economy.
Many traders have apparently concluded that the best way to play any pickup in business conditions is to own stocks of companies whose fortunes are most closely tied to the economic cycle.
Steel Stocks Rise
In the steel sector, U.S. Steel rose 1/8 to 28 and Bethlehem Steel climbed to 18. Among chemical issues, Du Pont added 1 to 60, Union Carbide rose 3/8 to 48 and Dow Chemical gained 1/2 to 36 1/2.
Monsanto climbed 2 3/8 to 52 5/8, and G. D. Searle rose 3/8 to 64 1/8. On Thursday, the companies announced an agreement for a $65-a-share takeover of Searle by Monsanto.
As money moved into industrial stocks, it appeared to be departing from the utilities and other interest rate-sensitive issues that have been market leaders in the recent past. Ameritech fell 2 5/8 to 92 3/8, Southwestern Bell dropped 1 3/4 to 85, Bell Atlantic fell 1 1/8 to 93 7/8 and Pacific Telesis fell 1 3/4 to 79 3/8.
BankAmerica dropped 3/8 to 17 in active trading. Earlier in the week, the company reported a large loss for the second quarter.
In the bond markets, prices edged higher after the Federal Reserve Board reported the operating rate at the nation’s factories edged down in June for the third consecutive month.
In the secondary market for Treasury bonds, prices of short-term governments were up 2/32 point, intermediate maturities were up between 3/32 point and point and long-term issues were up 6/32 point, according to 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.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.08 to 106.24 from Thursday’s close. But the Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 2.48 to 1,115.47.
T-Bill Yields Mixed
Yields on three-month Treasury bills rose 1 basis point to 7.16%. Six-month bills fell 1 basis points to 7.27%, and one-year bills were off 2 basis points at 7.37%.
Yields on 30-year Treasury bonds traded at 10.5%, unchanged from late Thursday.
In corporate trading, industrials were unchanged and utilities fell point in light trading.
Among tax-exempt municipal bonds, general obligations were unchanged and revenue bonds fell 1/8 point in light activity.
The federal funds rate, the interest on overnight loans between banks, traded at 7.75%, compared to 7.813% late Thursday.
