Up, Up and Away Again on Wall Street as Dow Gains 32.20

Lower interest rates, a rallying bond market and a smattering of other favorable economic developments ignited the stock market Wednesday and lifted the Dow Jones industrial average 32.20 points to a record 1,810.70.

Many of the blue-chip stocks that were unloaded in heavy trading last Friday gained as trading volume reached a heavy 161.46 million shares.

“With worries about Libya and peoples’ interest in profit taking, I frankly thought the market would waffle for the rest of the week,” said Hildegard Zagorski, a market watcher at Prudential-Bache Securities in New York. “But the nervousness seemed to subside and the thing just took off like a bird.”

Decline in Oil Prices

Reports that Nicaraguan troops had withdrawn from Honduras after a foray also helped lure some investors into the market, observers said.

The market was also helped by a slight decline in oil prices, a growing expectation of lower interest rates and the cheering effects of Tuesday’s news that consumer prices declined sharply last month, analysts said. Many analysts had not foreseen the 0.4% decline in the consumer price index, and the markets were also encouraged by reports of a monthly increase in durable orders.

Another fillip came from institutions filling out their portfolios before the close of the quarter, said William M. Lefevre, an analyst with the Purcell, Graham & Co. brokerage. Analysts said bond prices rose sharply toward the end of the day, aided by a prediction of declining worldwide interest rates by Albert Wojnilower, chief economist at First Boston Corp.

The Dow was not the only market gauge to set a record. The broad Standard & Poor’s 500 index rose 2.58 to 237.30, while the New York Stock Exchange composite index gained 1.48 to 136.70.

Advancing stocks outnumbered decliners by nearly two to one on the NYSE. Among the strong sectors were the airline, pharmaceutical and financial stocks.

Sun Chemical Gains

Ashland Oil advanced 2 5/8 to 54 5/8 with the launching of the Belzberg family’s $60-a-share bid for the company.

Sun Chemical leaped 6 to 51. Sun officials declined to comment on the stock’s activity.

UAL, the parent of United Airlines, rose 1 1/8 to 58 3/8, while AMR, the parent of American Airlines, rose 2 1/2 to 56. AMR was buoyed by a favorable recommendation from Michael Derchin, airline analyst with First Boston.

Drug maker Merck leaped 6 3/8 to 167 1/2, Warner-Lambert edged up 1 7/8 to 55 3/8 and Squibb gained 2 1/2 to 93 7/8. Eli Lilly, Abbott Laboratories and Bristol-Myers also gained more than 1 point.

Analysts said the sector’s gains underscored a widespread interest currently in pharmaceutical stocks.

Eastman Kodak, following a positive recommendation from Donaldson, Lufkin & Jenrette analyst Ty Govatos, rose 2 to 63 7/8.

Other blue chips that gained more than a point included General Electric, International Paper, Du Pont, American Express, Sears, Westinghouse and Minnesota Mining & Manufacturing.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,211, compared to 2,476 on Tuesday.

The NASDAQ composite index for the over-the-counter market added 1.32 to 370.60.

At the American Stock Exchange, the market-value index closed at 268.17, up 1.65.

The Wilshire index of 5,000 equities closed at 2,435.429, up 24.019.

Bond prices bounded ahead as predictions of lower interest rates encouraged buying, the Associated Press reported.

Interest rates, which move in the opposite direction of prices, tumbled on long-term securities.

The benchmark 30-year Treasury bond gained $15 for each $1,000 in face amount, and its yield slid to 7.78% from 7.90% late Tuesday.

A promising inflation outlook, largely due to the weakness in petroleum prices, has enhanced the chances for further interest rate declines, analysts said.

Speculation that the Federal Reserve Board may again reduce its principal loan rate resurfaced in the markets.

Traders were talking about the possibility that the Japanese government may trim its discount rate, perhaps as soon as next week, or at least before the economic summit takes place in May in Tokyo, said Mitchell Held, a vice president at Smith Barney, Harris Upham & Co.

When the Fed cut the U.S. discount rate by half a point to 7% earlier this month, the move was preceded by similar actions by foreign central banks. The discount rate is the interest rate on loans that central banks make to financial institutions.

“The market’s up in part because there are beginning to be some rumors of another discount rate cut. The economic numbers have not been inspiring, and with U.S. money supply growth low, and inflation under control, the Fed has the flexibility to ease its grip on credit,” Held said.

Meanwhile, the Treasury sold $6.5 billion in new seven-year notes at an average yield of 7.48%, down from 8.85% at the last auction on Jan. 7 and the lowest since 7.26% on Aug. 3, 1977. The sale attracted bids totaling $16 billion.

In the secondary market for Treasury securities, yields on three-month Treasury bills dipped one basis point to 6.39%. Six-month bills fell one basis points to 6.39%, while one-year bills dropped six basis points to 6.45%.

Prices of short-term governments rose by 3/32 point to 5/32 point and intermediate maturities rose by 11/16 point. A key 20-year bond gained 1 3/4 points, 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.

At midday, the Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, closed at 117.50, up 0.46 from Tuesday’s close. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 5.84 to 1,231.12.

In corporate trading, industrials jumped 1 point in active dealings and utilities moved up 5/8 point in busy trading.

Among tax-exempt municipal bonds, revenue bonds gained 1 point in average trading volume and general obligations rose 3/4 point in lighter trading.