Interest Rate Drop Helps Push Stocks Higher; Dow Up 19
The stock market broke out of last week’s slump on Monday with a rally attributed partly to declines in interest rates.
But analysts said the pace of trading, which was the slowest in more than three months, cast some doubts on the decisiveness and durability of the advance.
The Dow Jones average of 30 industrials, down 60.89 points last week, rebounded 19.09 to 1,793.77.
Volume on the New York Stock Exchange came to 102.40 million shares, down from 126.27 million on Friday and the lightest total since an 85.34-million-share day on Jan. 20.
Treasury Auctions to Be Watched
Analysts said stocks attracted some buying by traders who believed that last week’s selloff was excessive given the circumstances that prompted it.
One of those worries was the prospect of the record $27-billion sale of debt securities slated by the Treasury for this week. But, as the new trading week began, fears apparently eased that the large new supply of bonds and notes would push interest rates higher.
Reports from the economic summit meeting in Tokyo said most finance ministers of the major industrialized countries were optimistic about the chances for further cuts in rates.
In addition, a monthly survey of corporate purchasing managers, reported over the weekend, found that the economy slowed in April. That, too, was seen as a generally positive portent for interest rates.
Rates fell in the credit markets Monday. The Treasury’s 30-year bond rose 2.188 points, or more than $21 per $1,000 of face value, to yield 7.46%. Late Friday, the bond’s yield was 7.61%.
Sperry jumped 10 to 65. Burroughs proposed to acquire the company for $70 a share in cash and securities.
The Dow Jones industrial average benefited from gains in such blue-chip component stocks as International Business Machines, up 1 1/2 at 155 5/8; Merck, up 3 1/2 at 175 1/2; Eastman Kodak, up 1 1/8 at 57 3/8, and American Express, up 2 3/8 at 60 5/8.
Newton Zinder, analyst at E. F. Hutton, said in his morning market commentary that American Express had “become oversold and could have a technical rebound when the market rallies.”
Auto Issues Rise
Merck paced a generally strong pharmaceutical group. Pfizer gained 1 3/4 to 61 3/8, Eli Lilly 1 3/8 to 69 3/8, Abbott Laboratories 1 3/4 to 87 3/8 and SmithKline Beckman 1 3/4 to 91 5/8.
Auto issues also did well in spite of generally sluggish car sales reports for the late-April selling period. Chrysler added 2 to 39 1/8, Ford Motor 1 5/8 to 78 7/8 and General Motors 1 1/2 to 80 1/8.
In the bond market, prices rose sharply in a rally that analysts ascribed to the belief that the United States and its industrialized allies will coordinate more interest rate cuts as a result of the Tokyo summit.
They also attributed the rally to increasing confidence that the market will easily absorb the amount of new Treasury bonds and notes to be auctioned starting today.
Robert Bannon, money-market economist at Security Pacific National Bank in Los Angeles, said rumors about such a strategy swept the bond market late in the day and started a “feeding-frenzy mentality, a situation when everybody wants the same thing.”
In the secondary market for Treasury bonds, prices of short-term governments rose about 1/2 point, intermediate maturities rose 1 point to 1 3/4 point and long-term issues were up more than 2 points, according to the investment firm of Salomon Bros.
