Strength in Oil, Bank Issues Sends Dow Up 7
The stock market closed higher Tuesday in active trading, buoyed by the strength of oil issues, but worries over a sagging bond market kept prices from surging ahead.
The Dow Jones average of 30 industrials, up 18.84 points at its midday high, closed with a 7.03-point gain at 1,777.00.
Gainers outpaced losers by about four to three among New York Stock Exchange-listed issues. Volume on the Big Board came to 153.09 million shares, against 129.99 million on Monday.
Traders said oil issues and stocks of banks that have debt secured by energy collateral were the biggest gainers after the Organization of Petroleum Exporting Countries on Tuesday endorsed a two-month plan to cut production, thus lifting sagging oil prices. The 13-member oil cartel had been in a longstanding deadlock.
“The OPEC agreement took everybody by surprise,” said Larry Wachtel, a market strategist with Prudential-Bache Securities. “When it comes upon you suddenly, you have to make an adjustment. I would say Wall Street has responded.”
Among oil stocks listed in the Dow industrial average, Exxon closed up 2 5/8 to 64 3/8, Chevron was up 1 to 40, Texaco was up 5/8 to 30 3/8 and Du Pont, which owns Conoco, was up 1 5/8 to 77.
Bond Market Sags
Oil issues dominated the Big Board’s roster of actively traded stocks, led by Mobil, which had more than 3.87 million shares changing hands by the close.
Among the big banks, Manufacturers Hanover closed up 1 1/8 to 44 3/8, Chemical New York was up 3/4 to 45 and Citicorp was ahead 1 3/8 to 54.
But worries over a sagging bond market kept prices of stocks included on the Dow industrial average from moving even higher, securities analysts said.
Traders also cited the realization by some investors that the market wasn’t showing much strength without the rally in oil and bank stocks.
“The market, other than oils and bank stocks, turned slightly negative,” said Eldon Grimm, vice president of Birr, Wilson & Co. “You have sort of a battle between the bulls and the bears, so to speak.”
He added that some oil investors, hoping to cash in on the rally, were selling off stocks to make a quick profit.
The airline sector, where fuel costs make up a large percentage of operating expenses, suffered some losses. UAL was down 3/4 to 49 7/8 and AMR Corp., which owns American Airlines, dropped 1 1/8 to 49 7/8.
Stock in Ex-Cell-O Corp. rose sharply to 73 3/8 from 53 3/4 following Tuesday’s nearly $1-billion takeover bid by Textron, the aerospace and financial services giant, which rose 3/8 to 52 3/4.
Owens-Corning Fiberglas, which was the 12th most active stock on the NYSE, soared 6 7/8 to close at 74 amid continued speculation that it was an acquisition target of Santa Monica-based Wickes Cos. A Wickes spokesman had no comment.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 180.93 million shares.
Standard & Poor’s index of 400 industrials rose 1.33 to close at 262.21, and S&P;’s 500-stock composite index was up 1.04 to 237.03.
In the credit markets, long-term government bond prices slumped while shorter maturities posted more moderate declines.
The bellwether 30-year Treasury bond lost nearly a full point, or $10 for each $1,000 in face amount, which raised its yield to 7.52% from 7.45%.
“No one is talking about a major turnaround in inflation. But, with oil prices rebounding, inflation might not be as low as it otherwise would have been, which means interest rates might move higher,” said Maury Harris, first vice president and chief economist of Paine Webber.
The credit markets were also under pressure from the Treasury’s big borrowing operation.
The three-part financing package began Tuesday with an auction of $9.5 billion in three-year notes. The sale produced an average yield of 6.73%, down from 6.97% at the last auction of three-year notes on May 6 and the lowest since the 6.62% yield on Feb. 1, 1977.
The sale attracted bids totaling $24.7 billion.
