Dow Gains 17.89--Another Record
Buoyed by prospects for lower interest rates and higher corporate profits, Wall Street’s raging bull market stampeded to new record highs Monday as the Dow Jones industrial average gained 17.89 points in heavy trading.
The closely watched Dow index closed at 1,553.10, its 36th record finish this year. The old record was 1,535.21, set Friday after a week in which the market set closing highs in four of the five trading days.
Analysts attributed Monday’s buying binge to many of the same factors that have fueled the market rally all along. They said investors are optimistic that the Federal Reserve will allow interest rates to fall while inflation continues to slow and corporate profits rise.
“It’s just more of the same,” said A. Marshall Acuff Jr., portfolio strategist for Smith Barney, Harris Upham. He said many investors who may have thought the market was due for a correction a few weeks ago are now joining in the frenzy.
“But they’re not coming in all at one time, which is good from a market standpoint in that it’s keeping a steady supply of funds coming into the market,” Acuff said.
Analysts said the market rally stems partly from buying programs by institutional money managers who hope to capitalize on the rally before their year-end reports to clients are due. Richard McCabe, manager of market analysis at Merrill Lynch, said many money managers are trying to catch up with the performance of Standard & Poor’s 500-stock composite index.
More buying could come later this week from traders covering positions in the options and futures markets, analysts said. The December index options as well as futures and options on individual stocks all expire Friday.
Analysts contend there is little that would cause the rally to fizzle in the next month or so, although some predicted a market correction sometime in January, saying investors are ready for profit taking.
Late profit taking on Monday brought the Dow down from a mid-afternoon gain of more than 28 points from Friday’s close.
An optimistic sign for the market, traders said, is that much of the market’s rise has come from such blue chip issues as International Business Machines, General Motors and General Electric, as opposed to “secondary” issues of smaller companies that trade on the American Stock Exchange or in the over-the-counter market.
In previous rallies, buying fever in secondary issues has often signaled that the market was running out of gas, analysts said.
Since mid-September, the Dow average has gained more than 250 points for a nearly 20% gain, “making it one of the more dramatic rallies in recent history,” McCabe said.
Advancing issues outpaced declining stocks by a margin of almost two to one Monday on the New York Stock Exchange. NYSE trading volume of 176.03 million shares was down slightly from the 177.90 million shares traded Friday.
The NYSE’s composite index rose 1.07 to a record 121.90, topping the old record of 120.83, which also was set Friday. The Amex market value index rose 0.80 to 245.58, while the NASDAQ composite index for the over-the-counter market closed at 325.16, up 1.17.
S&P;’s 500-stock composite index, a broader gauge of market activity, gained 2.08 to 212.02. The Wilshire index of 5,000 NYSE, Amex and OTC stocks--an even broader measure--rose 17.303 to close at 2,170.387.
The NYSE’s most actively traded issue was Union Carbide, which rose 3/4 to 70 1/2 after the chemical giant announced measures to fight a hostile takeover by GAF. Another widely traded issue was Midcon, which rose 1 5/8 to 63 3/8 in reaction to an announcement of a $2.6-billion takeover attempt of the company by Wagner & Brown and Freeport-McMoRan.
Phillip Morris closed at 87 5/8, up 2 3/8. Last week, the tobacco industry won two court rulings in the battle over whether it should be held liable for diseases related to smoking.
Texaco fell 1 1/8 to 28 5/8 amid continuing concern about a $11.1-billion judgment that a Houston court has ordered it to pay Pennzoil.
Blue chips continued their momentum. IBM climbed 2 to 152, Du Pont 1 to 65 1/2, General Electric 2 3/8 to 73 3/8 and Merck 2 3/8 to 136 7/8.
Major auto makers, spurred in part by lower oil prices, also gained. Chrysler rose 2 3/8 to close at 46 5/8, General Motors gained 1 1/8 to 76 1/8 and Ford advanced 7/8 to 58 3/8.
