Stocks Rebound as Treasury Auctions End; Dow Up 10.91
The stock market turned upward today as traders took a slightly brighter view of the interest rate outlook.
The Dow Jones average of 30 industrials gained 10.91 to 1,786.21.
Advancing issues outpaced declines by about nine to five on the New York Stock Exchange.
Big Board volume totaled 136.03 million shares, against 129.89 million in the previous session.
The NYSE’s composite index rose 0.63 to 136.74. At the American Stock Exchange, the market value index was up 1.87 at 272.53.
Many Wall Streeters began to conclude late Wednesday that the Treasury’s record-size sale of bonds and notes this week was going better than had been expected earlier.
As a result, the belief spread that the financing, which wound up today with the sale of $9 billion in 30-year bonds, could be completed without any significant upward move in interest rates.
Major Tax Revision Bill
Worries about the Treasury auction were cited as a contributing factor in the stock market’s decline last week.
While the markets have been absorbing the new supply of government securities, brokers noted, they also have shown little disruption from the suddenly increased chances of a major tax-revision bill this year.
A measure passed by the Senate Finance Committee early Wednesday would, among other things, eliminate favorable treatment for long-term capital gains and curtail the incentives to invest in individual retirement accounts.
The bond market marked time early today as dealers awaited the outcome of the final auction in the government’s $27-billion borrowing package.
In the early trading, prices of most government securities were very close to late Wednesday’s levels. Corporate and municipal issues gained slightly. In the secondary market for government securities, the Treasury’s 30-year bond edged up 3/32 point to yield 7.5%, compared to 7.51% late in the previous session.
A major worry of bond dealers has been that demand would be lacking at the auctions, which would push interest rates back up and depress prices.
Some analysts had raised doubts about the demand of Japanese investors, who in recent years have become major buyers of U.S. government securities.
Declines in U.S. interest rates and the dollar have shaved the returns on dollar-denominated investments, which might lessen the Japanese appetite for U.S. investments, these analysts reasoned.
But the apprehensions have been melting away. The first two auctions drew ample demand, and yields on the new issues have been signiciantly below the levels produced at the most recent previous auctions of similar securities.
In the secondary market for Treasury bonds, prices of short-term governments were unchanged to up 1/32 point and intermediate maturities held at late Wednesday’s levels. The 20-year bond edged down 1/16 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.
In corporate trading, industrials and utilities increased point in quiet dealings.