Stocks Soar to Record Highs as Interest Rates and Oil Prices Drop; Dow Up 38.32
The stock market soared to new record highs today as oil prices and interest rates fell.
Analysts said investors were relieved that the U.S. bombing of sites in Libya early this week had not produced any apparent disruptions of the securities and commodities markets.
In fact, fears that oil prices might be pushed upward gave way to new declines in the oil market as traders concluded that the Organization of Petroleum Exporting Countries was still having trouble agreeing on measures to support prices.
Crude oil futures for May delivery dropped more than $1 a barrel today on the New York Mercantile Exchange.
That, in turn, helped drive interest rates lower in the credit markets. Prices of long-term government bonds, which move in the opposite direction from interest rates, rose as much as $30 for every $1,000 in face value.
On top of all that, traders found more good news in the first-quarter earnings reports of American Telephone & Telegraph and some other prominent companies.
The Dow Jones average of 30 industrials climbed 38.32 to 1,847.97, for its fourth-largest gain ever. The average easily topped the previous record closing high of 1,821.72, set on March 27.
Advancing issues outnumbered declines by more than 3 to 1 on the New York Stock Exchange.
NYSE Index Up
Big Board volume totaled 173.83 million shares, up from 123.65 million in the previous session.
The NYSE’s composite index gained 2.43 to a new high of 139.58.
The strong gains in bond prices came as traders focused on what they consider reasons for the Federal Reserve Board to pursue more generous credit conditions, including a Commerce Department report that construction of new houses and apartments sagged 2.4%, some analysts said.
The Fed may be clearing the way for an imminent reduction in the discount rate--the rate on loans to banks--or it may delay action until just before the seven major industrial countries convene an economic summit in Tokyo on May 4, analysts said.
A cut in the discount rate may be done as a concerted international approach, as it was last month. The Fed trimmed the U.S. discount rate by half a point to 7% on March 7 after several foreign central banks had made similar moves.
Debate Over Timing
“The Fed will cut the discount rate,” said Ray Dalio, president of Bridgewater Associates Inc. in Wilton, Conn. “The only debate is when. They are already allowing the Fed funds rate to decline in preparation for a discount rate cut.”
The federal funds rate, the interest banks charge on funds they lend each other overnight to meet reserve requirements, traded at 6 15-16% early today, down from 7% late Tuesday.
Yields on three-month Treasury bills fell eight basis points to 5.79% in early trading today. A basis point is one-hundredth of a percentage point. Six-month bills dropped 10 basis points to 5.82% and one-year bills fell nine basis points to 5.81%.
In the secondary market for Treasury securities, prices of short-term governments rose by 3-16 point to 9-16 point and intermediate maturities went up by 1/2 point. The 20-year bond spurted 1 1/2 points, according to the investment firm of Salomon Bros.
In corporate trading, industrials and utilities gained 1 point in brisk dealings.
