Stocks Rally on Optimism Over Interest Rates
The stock and bond markets put together broad rallies Tuesday, inspired by hopes for further declines in interest rates.
The Dow Jones average of 30 industrials, up more than 20 points at its afternoon peak, closed with a gain of 11.29 at 1,875.55.
Volume on the New York Stock Exchange stepped up to 140.62 million shares from 123.75 million on Monday.
The Commerce Department reported Tuesday morning that new factory orders for durable goods rose 0.4% in May.
The figures were interpreted as fresh evidence that the economy remained sluggish and that the odds might be increasing in favor of a further reduction in the Federal Reserve’s discount rate.
Albert Wojnilower, economist at First Boston Corp., said he believed that a discount rate cut was in the offing and that rates in general will decline about half a percentage point in the next few months.
In the bond market, the yield on the benchmark 30-year Treasury bond fell to 7.35% from 7.46% late Monday.
IBM, AT&T; Higher
However, stocks ran into some resistance from sellers late in the day after the Dow Jones industrial average made a brief run at the record closing high of 1,885.90 that it set June 6.
Among actively traded blue chips, International Business Machines gained 1 3/8 to 146 1/2, American Telephone & Telegraph to 25 1/8, Philip Morris 1 3/8 to 72 5/8 and RJR Nabisco 1 1/2 to 53 3/8.
Dart & Kraft led the active list, up 2 5/8 at 65. Analysts said the company, which plans to split into two separate entities, apparently was continuing a stock repurchase program.
Airline issues turned mixed after rising strongly Monday when People Express, a prominent price competitor, said it was considering the sale of all or part of its operations. That raised expectations on Wall Street that an end might be near to the fare wars that have depressed profits in the industry.
AMR, down 5/8 at 55, and UAL, down 1/2 at 54 1/2, ranked among the volume leaders.
In the daily tally on the Big Board, advancing issues outnumbered declines by a little more than two to one.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 165.04 million shares.
Standard & Poor’s index of 400 industrials rose 1.94 to 276.05, and S&P;'s 500-stock composite index was up 1.77 at 247.03.
Treasury Auction Set
In the credit markets, the Treasury Department sold $7.4 billion in new four-year notes at the lowest yields for such an issue in nearly nine years. The department said the notes were sold at an average yield of 7.26%, the lowest level since a similar issue was sold for a yield of 6.84% in September, 1977. At the last four-year note auction in March, the securities were sold at a yield of 7.29%.
The Treasury plans to sell $6.75 billion in seven-year notes today.
In the secondary market for Treasury bonds, prices of short-term governments rose by between 7/32 point and 1/2 point from Monday’s close, intermediate maturities were up by between 5/8 point and a full point and long-term issues were up by 1 points.