Market Rebounds; Dow Gains 5.76
The stock market bounced back from some early selling to post its second straight gain Thursday, recouping a bit more of the large losses that it suffered early in the week.
International Business Machines shares and several stocks involved in takeover news and speculation paced the late upswing.
The Dow Jones average of 30 industrials, down about 20 points at its lowest levels of the day, closed with a 5.76 gain at 1,831.83.
Volume on the New York Stock Exchange reached 146.16 million shares, against 142.88 million on Wednesday.
In the last two sessions, the Dow Jones industrial average has recovered a little more than 11 points after tumbling 80.14 on Monday and Tuesday.
There was much speculation all day about an impending reduction in the Federal Reserve’s discount rate. After the close, the Fed announced that it was lowering the rate, which is the interest that the central bank charges on loans to banks and savings institutions, to 6% from 6.5%, effective today.
Such a move has been forecast by many Wall Streeters for several weeks now, with concern mounting over the sluggish pace of economic growth.
Many observers will be watching the stock and bond markets with keen interest today to see whether the Fed’s move, so widely anticipated, can elicit a favorable response from investors.
Some analysts contend that a reduction has already been “discounted” by the markets. Indeed, there had been some talk that the Fed might go so far as to lower the discount rate a full percentage point to 5.5%.
IBM, which is often described as a bellwether stock that can set the tone for the general market, raised investors spirits in the afternoon by rebounding from a mid-session low of 141 to stand at 145 3/4, up 1 1/2 from Wednesday’s close.
Sanders Associates climbed 5 1/8 to 61 7/8 and Lockheed fell 3 1/8 to 52 1/8, both in active trading. Sanders agreed to be acquired by Lockheed for $60 a share, rejecting a $50-a-share bid by Loral Corp.
Sherwin-Williams Gains
Associated Dry Goods rose 5/8 to 65 5/8. The company said it had held merger talks with May Department Stores but hadn’t reached an agreement and was still considering buying back some of its stock.
Sherwin-Williams gained 3 1/8 to 27 3/4. The company said it had retained an investment banking firm to sell its Gray Drug Fair business.
General Electric, which reported a modest gain in second-quarter earnings per share, slipped 1/8 to 76 1/2.
In the overall tally on the Big Board, about eight issues rose in price for every seven that lost ground.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,749, compared to 2,885 on Wednesday.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 173.23 million shares.
Standard & Poor’s index of 400 industrials rose 0.03 to 270.29, and S&P;’s 500-stock composite index was up 0.19 at 243.01.
In the credit markets, short-term interest rates fell and government bond prices gained as traders gave a hearty welcome to the Fed’s cut in the discount rate.
The price of the 30-year Treasury bond wound up the day about point higher than Wednesday’s closing level, which put the closely watched bond’s yield at 7.12%, compared to 7.14% late in the previous session.
A lower discount rate might prolong this year’s downward pattern in interest rates, analysts have said. Bond dealers welcome falling rates because they coincide with rising bond values.
In the secondary market for Treasury bonds, prices of short-term governments rose 5/32 point to 3/16 point and intermediate-term governments were up by 3/32 point to 7/32 point. The 20-year bond rose 3/16 point.
In corporate trading, industrials rose 3/8 point in fairly active trading while utilities dipped 1/8 point in quieter activity. Among tax-exempt municipal bonds, general obligations gained 1/2 point and revenue bonds held steady.
