Dow Surges 25 to New High as Investors Jump on Rally’s Bandwagon
Goaded by the fear of missing a major stock market rally and encouraged by low interest and inflation rates, investors surged into the stock market Wednesday, pushing key indexes to new highs.
The Dow Jones industrial average of 30 major stocks jumped 25.34 points to 1,484.40, surpassing the previous record of 1,475.69 set Nov. 27.
On the New York Stock Exchange, about four issues rose in price for every one that declined, according to the Associated Press. The exchange’s composite common stock index, a broader indicator of market direction than the Dow, rose 1.82 points to a record 117.70, topping the high of 116.68 reached Nov. 27.
The Wilshire index of 5,000 equities closed at 2,096.913, up 31.352.
Trading intensified as the session progressed. Volume on the New York Stock Exchange came to 153.16 million shares, up from 109.69 million on Tuesday.
Heavy Block Trading
Large blocks of 10,000 or more shares traded on the NYSE totaled 3,211, compared to 1,965 on Tuesday.
At the American Stock Exchange, the market value index closed up 2.38 at a 52-week high of 244.13. Standard & Poor’s index of 400 industrials rose 3.74 to 227.24, and S&P;’s 500-stock composite index was up 3.37 to 204.23.
Falling interest rates have prompted many investors to turn to the stock market, market analysts said. With short-term rates below 7%, “money is flowing out of money-market funds into the stock funds,” said Michael J. Hines, equity funds product manager of Boston-based Fidelity Investments.
The stock market surge is intensified by the fact that these swelling funds are chasing fewer stocks due to the number of mergers and leveraged buy-outs by private parties. About “$146 billion (in) securities have come out of the market in the last two years,” Hines said.
“Ten percent of the equities have disappeared with all these corporate buy-backs,” one West Coast portfolio manager said, predicting privately that the bull market won’t end until “the first recession and a bunch of overly leveraged companies go belly-up.”
Hines likened the current market to the one of August, 1982, when crescendoing volumes also evoked disbelief. The major difference, he said, is that “the small investor probably hasn’t gotten as involved” this time because more small investors have shifted their holdings to mutual funds.
Eugene E. Peroni Jr., director of technical research at Bateman, Eichler, Hill Richards in Los Angeles, said he sees no evidence that the market will soon peak.
“There’s so much appetite for equities right now . . . (and the market) gives up so little ground day by day that it forces emotional investment,” Peroni said, noting that money managers are “forced to go in at fairly high prices to show that they were involved in this rally.”
As a technician, studying the price movement and volume of individual stocks and the overall market, Peroni said he based his optimism on the fact that “we still have not uncovered any strong excesses.” As an example, he cited “big gap openings” in blue chip stocks--large price jumps at the start of a day’s trading--which have not yet materialized.
Analysts also cited the declining dollar as a factor in the market’s rally. A weaker dollar is likely to improve the earnings of companies suffering from foreign competition.
Leading the active list at the close, Texaco rose 3/4 to 31 3/4. A judge in Houston is scheduled to hold a hearing today on whether to uphold a jury’s decision that Texaco should pay Pennzoil $10.53 billion for improperly interfering in Pennzoil’s unsuccessful bid for Getty Oil.
Analysts said companies that have been targets of takeover speculation received attention.
For the second straight day, Viacom was among the most actively traded issues, rising 1/4 to 63 1/2 at the close. The company issued 2.5 million common shares, increasing Viacom’s total number of shares outstanding by about 10% and making it more expensive for potential bidders to acquire the firm.
R. H. Macy was also an actively traded issue, up 1/8 at 61 1/2.
Industry analysts said interest in the semiconductor group may have been helped by price increases from Japanese firms and also a preliminary ruling from the Commerce Department that some Japanese products were being sold in the United States at less than fair value.
Among semiconductor issues, Advanced Micro Devices jumped 1 1/4 to 29 3/8, Texas Instruments 3 3/8 to 105 3/4, National Semiconductor 3/4 to 13 5/8 and Motorola 1 7/8 to 37 3/4.
In the computer group, Digital Equipment climbed 2 3/4 to 124 5/8 and IBM gained three to 141 5/8.
AT&T; rose 3/8 to 24, Burroughs 1 3/8 to 59 7/8, Data General 2 to 46, Cray Research 1 to 68 1/8 and Hewlett-Packard 1 1/8 to 36 1/2.
