Buyers Return to Stocks; Dow Index Jumps 31.13
The stock market rose sharply Thursday, sending the Dow Jones industrial average up 31.13 to close at 1,806.30, but analysts were able to cite no particular reason for the climb, the steepest in more than a month.
“If you were looking for a bell to ring to tell you why the market went up,” Larry Wachtel of Prudential-Bache Securities said, “you won’t find it. Bonds were up only marginally; the oil stocks rose only slightly. There was no news around to explain it. It was pure perversity.”
Thursday’s rise, which brought the increase in the industrial average to 46.50 so far this week, was the largest since April 16, when the average increased 38.32 points.
The New York Stock Exchange’s composite index rose 2.42 to 138.17. Standard & Poor’s index of 400 industrials rose 4.99 to 268.21, and S&P;’s 500-stock composite index was up 4.67 at 240.12.
The NASDAQ composite index for the over-the-counter market advanced 3.57 to 389.62. At the American Stock Exchange, the market value index closed at a new high of 276.22, up 2.17.
Trading Volume Picks Up Steam
Volume on the New York Stock Exchange picked up steam, totaling 144.92 million shares, compared to 117.09 million on Wednesday. Nationwide turnover in issues listed on the exchange, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 168.09 million shares.
There were 1,216 advancing stocks on the NYSE on Thursday as 426 declined and 359 were unchanged.
Although market experts could point to no specific reasons for the sharp rise in prices, there was an air of general optimism among investors throughout most of the day. Much of it stemmed from growing expectations that a tax reform bill will be approved by Congress this year.
Retail stocks were strong, reflecting the belief that the tax reform bill approved recently by the Senate would be favorable to the retail sales industry, even aside from the effect that its lower tax rates would have on consumer spending patterns. Also, earnings reports lately in the industry have generally been better than expected.
Among the leaders Thursday were Sears, which rose 2 to 47 3/8, and Melville Corp., up 4 1/2 to 67 3/4.
Among gainers in other areas of the market, McDonald’s rose 3 3/4 to 104 1/2, Merck 1 to 186 3/8, Minnesota Mining & Manufacturing 3 to 101 3/4 and General Motors 1 1/2 to 76 3/8.
Upjohn jumped 5 1/2 to 88 7/8. The company told shareholders at its annual meeting that it expects regulatory approval within a year to market its drug minoxidil as a treatment for male pattern baldness.
Interest-Sensitive Stocks Up
Market traders clearly believed that Thursday’s reported $1.3-billion gain in the money supply, larger than anticipated, did not presage higher interest rates. They bought interest-sensitive savings and loan and bank stocks heavily. Utility stocks also rose broadly.
Adding to the optimism about interest rates, analysts said, was the government’s report that, largely as a result of a big falloff in military buying, new orders for durable goods decreased 0.8% in April. This helped the perception of downward pressure on interest rates because it indicated that economic growth remained slow.
And there were, in fact, some spotty drops in interest rates in the credit markets, pushing prices of some long-term government bonds up about $5 for every $1,000 in face value.
The sharp rise in the stock market was all the more surprising since IBM, normally a bellwether issue, moved down, dropping 1 1/8 to 143. It was the NYSE’s most active issue with 2.1 million shares traded.
Analysts noted that there were some technical factors that contributed to Thursday’s market increase. It was felt, for instance, that there was some nervous buying by investors trying to minimize losses on stock that they had borrowed and sold in anticipation of falling prices. As they saw prices rising, they rushed to cover these short sales.
Also contributing to the sharp rally, analysts said, was a large number of “buy programs.” These programmed transactions, a market strategy developed in recent years, involve both stocks and stock index futures and are triggered by price disparities between the two markets. They have little to do with the overall outlook for the market and the economy.
Bond prices ended mixed in light trading, showing little reaction to economic news or the larger-than-expected increase in the nation’s money supply, the Associated Press reported.
The Treasury Department’s benchmark 30-year bond rose about $10 for each $1,000 in face amount, and its yield fell to 7.50% from 7.59% late Wednesday. Some shorter-term issues fell in value.
In the secondary market for Treasury bonds, prices of most short-term governments were down by about 1/16 point, intermediate maturities rose by as much as 1/2 point and long-term issues were up by one point, according to the investment firm of Salomon Bros.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.02 to 115.52.
