Market Roars Ahead, Sending the Dow Up 27.52 to Record High
The stock market Monday staged a broad, decisive rally fueled by a growing consensus that interest rates will decline further and that corporate profits may improve. The Dow Jones industrial average, in its biggest advance in almost 10 months, gained 27.52 points to close at a record 1,431.88.
Monday’s surge came during a traditionally sleepy holiday session. Although most banks and other financial institutions that contribute heavily to trading volume were closed for Veterans Day, volume on the New York Stock Exchange rose to 126.5 million shares from Friday’s 114.96 million.
The latest rally was another star turn by the Dow Jones industrial average of 30 major stocks, all of which rose in Monday’s trading.
Broader Indicators Rise
The Dow’s increase was its biggest since Jan. 21, when it rose 34.01 points. But the broader market indicators also began moving to or toward record highs, a process that professionals say would represent a “confirmation” of the Dow’s firmly bullish performance of the last few weeks.
The New York Stock Exchange composite index rose 1.88 points to close at 113.82, modestly exceeding the previous record of 113.49 set in July.
The Associated Press market report showed active trading among key blue chips. International Business Machines rose 2 1/8 to 134 5/8, Sears, Roebuck 3/4 to 36 5/8 and American Telephone & Telegraph 3/8 to 21 1/2.
The Wilshire index of 5,000 equities closed at 2,024.177, up 32.162, or 1.61%, from Friday.
The American Stock Exchange market-value index rose 1.68 to close at 235.41; the NASDAQ composite of over-the-counter stocks rose 2.29 to 302.31, and the Value Line Index of about 1,700 stocks rose 2.33 to close at 202.12. None of those figures is a record, but the indexes’ consistent gains in recent weeks have been heartening to stock investors.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 149.24 million shares.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,608, compared to 2,301 on Friday.
Market analysts and institutional money managers say the key to the rally’s strength still appears to be the tremendous supply of money available for investment in an otherwise flat economy.
While the nation’s growth in money supply has strongly exceeded targets set by the Federal Reserve Board, the Fed has given no indication that it intends to rein in money growth by placing upward pressure on interest rates.
Market ‘Would Benefit’
“My basic thesis has been that the market would benefit from a buildup of liquidity that has nowhere else to go because the basic economy is very sluggish,” said Robert Nurock, editor of the Astute Investor, a market newsletter headquartered in Paoli, Pa. “Up to now that money’s been placed in short-term instruments, but the decline in interest rates has forced investors to make a commitment.”
The market’s apparent strength took the wind out of some naysayers’ sails.
“It’s a little late to turn terribly bullish,” said Michael Metz, a technical analyst for Oppenheimer & Co. and an outspoken bear in recent weeks, “but the market looks like it’s going higher.”
Characteristically, interest-rate-sensitive stocks performed particularly well Monday. Citicorp, a holding company for the nation’s second-largest bank, was one of the 10 most active stocks on the New York Stock Exchange, closing at 45, up 1 1/8. Manufacturers Hanover rose 1 1/8 to 40 3/8 and J. P. Morgan 7/8 to 54 1/2.
Standard & Poor’s index of 400 industrials rose 3.91 to 218.81, and S&P;’s 500-stock composite index was up 3.57 at 197.29. The S&P; 500’s previous high was 195.65 on July 17.
The Dow Jones utility average, whose component companies are all at the mercy of interest rates, showed a strong advance of 2.77 points to close at 164.69.
Disagreement Among Analysts
Analysts still disagree over the future of the corporate economy and its implications for the stock market. On the one hand, Nurock cited “better than expected” third-quarter earnings reports and argued that consistent cost cutting would produce even greater improvements in future quarters.
But John Duffield of Vanguard Group, a Valley Forge, Pa., mutual fund firm, said the firm’s doubts about corporate earnings made it “a bit more cautious” than other institutional investors.
“We’re concerned about some of the economic factors,” including the inflationary impact of the federal budget deficit, he said, while stressing that Vanguard’s eight independent investment advisers had kept the firm’s funds “quite fully invested” in stocks. “So we have done rather well,” he said.
Among other active issues were Merrill Lynch, up 1 1/8 at 32 1/8; Phibro-Salomon, up 1 3/4 at 41, and Paine Webber, up 1 at 31 1/8.
Walt Disney Productions, which reported a quarterly profit versus a loss in the comparable year-ago period, climbed 3 to 96.
On the downside, Potlatch dropped 2 to 39 3/4. Directors rejected a $45-a-share takeover bid from First City Financial Corp. and authorized the company to buy back as much as 20% of its outstanding stock.
Clark Equipment fell 2 1/8 to 26 7/8. The company reported an operating loss for the third quarter and said it will recommend that directors discontinue dividend payments in the first quarter of next year.
In the bond market, corporate and municipal bond prices remained practically unchanged in quiet trading. The market for U.S. Treasury securities was closed for the Veterans Day holiday.
In corporate trading, industrials and utilities were unchanged in light trading. Among tax-exempt municipal bonds, general obligations and revenue bonds were also generally unchanged in light dealings.
The federal funds rate, the interest on overnight loans between banks, traded at 7.875%, compared to 7.813% late Friday.
