Dow Closes Up 12.96 to Set Another Record
Stock prices rose strongly again Monday, hitting record highs for the third straight session on the Dow Jones average of 30 industrials and reflecting a late bond market rally and continued optimism over the future of the U.S. economy.
The Dow closed 12.96 points higher at a record 1,626.38 as a late surge, triggered by a drop in interest rates, nearly doubled early gains.
The well-known market indicator had reached record highs in the two previous sessions and although analysts said there were no significant new developments to spur the market Monday, they added investors still were cheered by lower oil prices and the falling U.S. jobless rate that helped propel the market last week.
Sign of Momentum
Lower oil prices generally are seen as improving chances that inflation will remain subdued, while the sharp drop announced last week in the January unemployment rate was viewed by many as a sign of accelerating U.S. economic momentum.
“We’ve reached a certain expectation level on Wall Street where no matter what happens during the day, we expect it to come out well at the close,” said Larry Wachtel, an analyst for Prudential Bache Securities in New York.
Wachtel also said that many investors, looking for places for individual retirement account funds, probably were “pouring money” into mutual funds, investing in stocks, in order to join the torrid bull market.
Some analysts also credited stock index trading programs for accentuating the rise in stock prices Monday.
In index trading, investors attempt to profit from temporary disparities between the price of a futures contract based on a stock index and the level of the index itself. When one of the two is sharply higher, index traders buy the lower one and simultaneously sell the higher one, a practice that critics have said periodically causes stock market volatility.
Interest rates dipped in the credit markets late Monday, when oil futures fell sharply in the commodity markets. When stock prices rose to a certain level in response to the drop in interest rates, they triggered several index-buying programs, which amplified the upward trend and caused a late surge in the Dow, analysts said.
“You look around for the hard news event that would trigger a move and it’s hard to find,” said William LeFevre, of Purcell, Graham & Co. in New York. “It’s just program buying.”
Gulf States Active
On the New York Stock Exchange, Gulf States Utilities was 1/8 lower at 14 3/4 to lead the list of the most actively traded issues with 3.96 million shares changing hands, including a 1-million-share block at 14 7/8.
Wells Fargo & Co. rose 7 to 74. The corporation Friday announced it was buying financially-troubled Crocker National Corp., a move that would make Wells Fargo one of the 10-largest U.S. bank holding companies.
Among blue chips, American Telephone & Telegraph was unchanged at 21, IBM was up 1 1/2 to 157, General Motors was up 1 7/8 to 76 3/4 and Goodyear was 5/8 higher at 33 3/4.
Walt Disney rose 4 to 123 3/8 in a gain some analysts attributed to the strong box-office performance of its latest film, “Down and Out in Beverly Hills,” and unconfirmed rumors that it would sell its Epcot Center theme park.
Other gainers included UAL, up 2 3/8 to 57 3/8; Data General, up 1 3/8 to 45 3/8; US West, up 1 7/8 to 91 3/4; Pacific Telephone, up 1 3/8 to 83 7/8, and Chrysler, up 2 3/4 to 51 3/8.
Gainers outnumbered losers by about five to three on the New York Stock Exchange.
Big Board volume totaled 129.91 million shares, against 144.40 million on Friday.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,396, compared to Friday’s 2,754.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 155.08 million shares.
Standard & Poor’s index of 400 industrials rose 1.92 to 238.70 and S&P;’s 500-stock composite index was up 1.68 to 216.24,
In the bond market, prices of long-term government bonds jumped by nearly $10 for every $1,000 in face value, while short-term interest rates pulled back in advance of a meeting of Federal Reserve Board policy-makers.
The central bank’s Federal Open Market Committee meets privately today and Wednesday to chart a course for the next few weeks.
While most analysts expect no significant changes of direction will result from this week’s meeting, bond prices surged in afternoon trading.
Rise Fueled by Rumors
William Sullivan, director of money-market research at the investment firm Dean Witter Reynolds, said the rise appeared to be fueled by two rumors.
One rumor, quickly denied by a Fed spokesman, was that Fed Chairman Paul A. Volcker would resign at today’s meeting, he said.
Sullivan added that those who bid prices higher on the rumor appeared to feel that Volcker’s absence would free the remaining Fed members to relax the central bank’s grip on credit.
The second rumor, Sullivan said, was that Japanese regulators would soon take steps to permit Japanese banks and pension funds to invest more heavily in dollar-denominated securities. He said that rumor could not be confirmed or denied by the end of the day’s trading.
Many analysts expect the Fed will leave its monetary policy unchanged at this week’s meetings, because the economy is growing at a satisfactory rate.
But at the same time, a special federal court panel last week struck down a central provision of the Gramm-Rudman-Hollings law that was intended to mandate a balanced federal budget by 1991.
Passage of the law last year helped prolong rallies in the stock and bond markets as traders anticipated decreased federal borrowing.
In the secondary market for Treasury securities, prices of short-term governments rose by between 1/32 point and 6/32 point, intermediate maturities were up by between 7/32 point and 25/32 point and long-term issues jumped 30/32 point, according to the investment firm of Salomon Bros.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, edged up 0.39 from late Friday to 111.02. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 4.34 to 1,164.59.
In corporate trading, utilities and industrials were up 1/2 point in light activity. Among tax-exempt municipal bonds, revenue and general obligations rose 3/8 point in moderate activity.
