Stocks Edge Higher; Dow Adds 2 Points : Market Slows to Digest Recent Sharp Gains, Analysts Say
The stock market slowed to digest the gains of its record-setting surge of the previous session, but it still managed to move forward modestly Friday.
The Dow Jones average of 30 industrials rose 2.06 points to 1,464.33, marking its third daily record this week. The market’s best-known indicator had jumped 23.05 points to 1,462.27 on Thursday, surpassing the closing high of 1,440.02 set Monday.
Gainers outpaced losers by about three to two on the New York Stock Exchange. Drug stocks were up, and several other issues were boosted by takeover speculation.
“The remarkable thing about today is that, instead of the market going into the tank and going to sleep, the market is moving forward. The fact that you’re able to maintain momentum is the hallmark of a bull market,” said Larry Wachtel, an analyst with Prudential-Bache Securities.
There was some profit taking but further buying prevented a decline in prices, analysts said.
Day of Consolidation
Newton Zinder, an analyst with E. F. Hutton, said: “It’s more of a consolidation day after a record day and in advance of the weekend. Investors are a little cautious.
“Even if the market does not go up (strongly) when it’s digesting its gains, it’s not going down either,” Zinder added.
Hopes for continued declines in interest rates have been fueling the rally, analysts say.
After the stock market closed Thursday, the Federal Reserve Board reported that the nation’s basic money supply rose $1.5 billion in early November. The increase, although in line with analysts’ predictions, makes it unlikely that the Fed will loosen its grip on credit anytime soon for fear of rekindling inflation, analysts said. But the stock market shrugged off the news.
“The market has been taking the rise in the money supply with a grain of salt,” Wachtel said.
He added: “The trend on interest rates is lower. The discount-rate cut will come along.”
The discount rate, which now stands at 7.5%, is what the Fed charges on loans to its member banks.
Henry Kaufman, chief economist of Salomon Bros., said Friday that he expected the Fed to cut its discount rate in January. Other economists also have been predicting that a reduction will come soon.
In other economic news, the Labor Department reported that rising food and automobile costs sent consumer prices up 0.3% in October, breaking a string of five consecutive 0.2% monthly increases. However, retail prices have risen at an annual rate of just 3.3% so far in 1985.
Sterling Drug shot up 3 1/8 to 39. The company declined to comment on the activity. Speculation centered on the possibility that Sterling was a takeover target or that its management was planning a leveraged buy-out.
Many other drug stocks rose, too. Upjohn was up 1 1/2 to 134, Warner Lambert 1 1/2 to 41, Merck 1 1/8 at 125 7/8 and Schering Plough 2 3/4 at 58. Pfizer, however, fell 1 to 50 1/2, and SmithKline Beckman dipped to 74 1/8.
Pennzoil Jumps
Pennzoil was up 3 5/8 to 62. Earlier this week, a Texas jury ordered Texaco to pay $10.5 billion to Pennzoil after ruling that Texaco had enticed Getty Oil to break a contract to merge with Pennzoil in early 1984. Texaco, which says it will appeal the ruling, bought Getty for $10.1 billion.
Union Carbide was up 1 1/2 to 61 3/4. Disney was up 1 5/8 to 97 7/8. McDonald’s was up 1 1/2 to 73 1/2.
Halliburton rose 1 3/8 to 27 3/4, while Schlumberger was up 1 3/4 at 35 1/2.
Volume on the Big Board totaled 133.75 million shares.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 159.63 million shares.
In the bond market, prices drifted lower and interest rates moved up slightly in a session dominated by concerns over the government’s busy financing schedule.
In what marked the fifth in a seven-part series of auctions, the Treasury sold $6.76 billion of new 30-year bonds at an average yield of 9.93%. The sale provided the government with fresh cash.
The yield was the lowest since 8.91% on Aug. 15, 1979, and was down from 10.66% at the most recent previous 30-year bond auction, which took place Aug. 15.
