Stocks, Bonds Soar; Dow at Record High : Declining Oil Prices, Prospects for Lower Inflation Spur Rally
Stock prices soared Monday and the Dow Jones industrial average made another run at the 1,500 level before closing at a record high in a rally sparked by declining oil prices and an improved outlook for inflation.
The average of 30 blue chip industrial stocks rose 19.84 to 1,497.02, topping the Dec. 4 record of 1,484.40 and setting the 32nd new high of 1985.
Bond prices also scored impressive gains and interest rates declined amid optimism over the outlook for lower oil prices and progress in Congress on legislation to reduce the federal budget deficit.
An announcement by the Organization of Petroleum Exporting Countries that it will concentrate on keeping its share of the world oil market instead of keeping oil prices up by limiting production sent crude oil prices lower on the commodity markets.
May Help Tame Inflation
Although OPEC officials said they did not want a price war, analysts said the cartel’s decision would mean lower oil prices as competition against non-OPEC producers such as Britain heated up. Lower oil prices generally are viewed as a sign that inflation will be subdued or lower in the near future.
In addition, Monday was the first trading session since U.S. House and Senate negotiators announced that they had agreed on a measure to eliminate the federal budget deficit over several years. The agreement to cut the deficit, which has been blamed for keeping interest rates relatively high, helped push interest rates lower in the credit markets.
Oil stocks declined broadly in heavy trading.
Amoco fell 2 1/2 to 63 3/8, Atlantic Richfield 1 to 63; Chevron 2 to 36, Kerr McGee 1 1/2 to 32 and Occidental Petroleum 1 7/8 to 32. Also declining were Mobil, down 1/2 to 29 7/8; Texaco, down 3/4 to 30 3/4, and Exxon, down 1 1/8 to 52 1/8.
The stocks of some airlines, which benefit from lower oil prices through lower fuel costs, also advanced. United rose 2 to 51, American 1 5/8 to 42 3/8, Delta 3/4 to 39 3/4 and Eastern to 6 3/4.
Union Carbide, one of the components of the Dow Jones industrial average, rose 3 3/8 to 66 3/8 as it led the list of most active stocks with 2.78 million shares changing hands. GAF, which spurted 9 5/8 to 57, has said it will offer $68 a share to acquire Union Carbide.
Other advancing issues included Teledyne, up 5 3/8 to 295; IBM, up 2 7/8 to 144 5/8; Digital Equipment, up 2 5/8 to 127 5/8; RCA, up 2 to 49 7/8; General Motors, up 1 3/8 to 72 3/4; Bell Atlantic, up 2 3/8 to 103 1/8, and Minnesota Mining & Manufacturing, up 2 to 87 1/8.
Gainers Outpace Losers
Upjohn paced declining issues, dropping 6 to 131 1/2, although the company said it knew of no reason for the drop.
Gainers outpaced losers by about five to three on the New York Stock Exchange.
Big Board volume totaled 144.01 million shares, against 125.54 million on Friday.
The NYSE’s composite index rose 0.63 to 117.62.
At the American Stock Exchange, the market value index was 242.09, down 0.79.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 169.69 million shares.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,758, compared to 2,401 on Friday.
The Wilshire index of 5,000 equities closed at 2,095.930, up 9.393.
Standard & Poor’s index of 400 industrials rose 1.17 to 227.02, and S&P;’s 500-stock composite index was up 1.26 to 204.25.
The NASDAQ composite index for the over-the-counter market closed at 316.88, up 0.09.
In the bond market, yields on a benchmark 30-year Treasury bond fell to 9.81% from 9.87% late Friday. Prices on intermediate Treasury securities shot up more than a full point.
In the secondary market for Treasury securities, prices of short-term governments increased between 7/32 point and 11/32 point, intermediate maturities jumped between 15/32 point and 13/32 point and long-term issues were up 1/2 point, according to the investment firm of Salomon Bros.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, went up 0.59 to 109.21. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 7.08 to 1,146.85.
In corporate trading, industrials rose 1/2 point and utilities rose 7/8 point. Trading was moderate.
Among tax-exempt municipal bonds, revenue bonds rose 3/4 point and general obligations rose 1/2 point and activity was moderate.
Yields on three-month Treasury bills were down one basis point at 7.2%. Six-month bills fell three basis points to 7.26%, while one-year bills dropped 12 basis points to 7.27%.
The federal funds rate--the interest on overnight loans between banks--traded at 7.938%, compared to 7.875% late Friday.
