Dow Soars 38 Points to Close at a Record High; Oil Issues Pace Market
The stock market surged ahead to record highs today, propelled by a wave of buying by professional program traders and revived enthusiasm for oil stocks.
The Dow Jones average of 30 industrials jumped 38.38 to 1,919.71, surpassing the previous closing high of 1,909.03 set on July 2.
It was the fifth largest point gain ever recorded by the average, and the biggest since it climbed 39.03 on March 14.
Advancing issues outnumbered declines by more than three to one on the New York Stock Exchange.
Big Board volume totaled 189.42 million shares, against 154.31 million in the previous session. The NYSE’s composite index rose 2.02 to a new high of 145.76.
Analysts said rising prices for stock-index futures caused a rush by sophisticated traders to sell the futures and buy individual stocks in the strategy known as program trading.
In addition, they pointed to a scramble to buy energy issues as the belief spread that the outlook for oil prices was strengthening. Takeover news and speculation also apparently helped stir interest in numerous stocks.
Many Wall Streeters were looking ahead to Friday’s report by the Labor Department on the employment situation for August.
If the data show continued weakness in key areas of the economy, many analysts believe, the Federal Reserve may act again soon to ease credit conditions. That, in turn, would presumably exert new downward pressure on open-market interest rates, which have risen in the past couple of days.
The investment firm of Smith Barney, Harris Upham estimates that the unemployment rate will show little change, but that growth in nonfarm payroll employment will have slowed from July.
In the credit markets, bond prices fell in early trading today, continuing this week’s decline as investors awaited the release the report on August unemployment.
Elizabeth Reiners, an economist with Dean Witter Reynolds, said the market was showing some signs of recovering from the sell-off, sparked by soaring precious metals prices, “until we had some rumors floating around” regarding the Labor Department unemployment figures due out Friday.
“There’s some talk that the figures will come in strong,” she said.
Many bond investors tend to view signs of economic strength as bearish for bonds, on the grounds a stronger economy increases demand for credit, which drives up interest rates.
In the secondary market, the benchmark 30-year Treasury bond posted the sharpest drop, falling about 1/2 point, or $5 for $1,000 in face value. But its yield rose to about 7.40% from 7.38% late Wednesday.
Prices of short-term governments fell 3/32 point, intermediate maturities fell 5/16 and 20-year issues were down about 1/8 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 were unchanged in light trading.
Among tax-exempt municipal bonds, general obligations fell 3/8 point and revenue bonds were down point. Trading was light.
Yields on three-month Treasury bills were unchanged. Six-month bills fell 1 basis point to 5.25% and one-year bills were off 2 basis points at 5.34%.
A basis point is one-hundredth of a percentage point.
The federal funds rate, the interest on overnight loans between banks, traded at 5,75%, unchanged from late Wednesday.