Stocks Shoot Up 69.89 Points in Best Day Ever
The stock market Friday shrugged off the apparently bad economic news of earlier this week to post the biggest one-day point gain of all time in the Dow Jones industrial average. The Dow index closed at a record 2,390.34.
The Dow’s gain of 69.89 points, or 3.01%, easily outstripped its previous record gain of 54.14 set Feb. 17 and more than made up for its panicky fall of more than 57 points on Monday. Shortly before the end of Friday’s trading day, the Dow had been up by more than 77 points.
In fact, the market’s behavior Friday was almost a mirror-image of Monday, when fears of the dollar’s decline and of a possible trade war with Japan sent the Dow index plummeting and set off speculation that the market had topped out. Instead, after Friday’s explosive rise and more modest gains on Wednesday and Thursday, the closely watched index of 30 blue-chip industrial stocks showed a net gain for the week of 54.5 points.
“This market’s got a very thick skin against negative news,” said Eugene Peroni, technical market analyst for the Philadelphia investment firm of Janney Montgomery Scott.
All other broad market indexes showed sharp gains Friday, although not all closed at new record highs. Trading volume on the New York Stock Exchange was a heavy 213.39 million shares.
Wall Street professionals attributed the powerful rally to several factors. One was a firming of the dollar against foreign currencies, particularly the yen, in Friday’s markets. By easing fears that the U.S.-yen exchange rate will continue to deteriorate, that attracted a large volume of Japanese and other foreign capital to the blue-chip stocks measured by the Dow.
Interest rates also fell, fueling a bond rally from which stock investors took their cue. The bond markets were reacting enthusiastically to federal data released Friday morning showing a smaller-than-expected drop in the unemployment rate to 6.5% in March from 6.6% in the previous three months.
The figures suggested to many analysts and investors that the economy remains sluggish enough to accommodate a further fall in interest rates--which would drive bond prices still higher--before summer.
Prime Rate Non-Event
In all, the performance of interest-rate markets since Monday has turned the slight rise in the prime rate engineered Monday and Tuesday by Citibank, Chase Manhattan and other major lenders into a non-event. The banks kicked up the prime rate, which is the rate theoretically offered to their best loan customers, to 7.75% from 7.5%.
Most other interest rates have fallen in the days since the banks’ action. The prime rate rise, argued Ben Niedermeyer, portfolio manager for Denver-based Janus Capital, “was an opportunistic move by Citibank to bolster their (profit) margins,” particularly in the face of potentially heavy losses on Brazilian and other foreign loans.
Many market analysts say they are expecting a large inflow of cash for investment in stocks from taxpayers opening last-minute individual retirement accounts, which must be opened by April 15 to be eligible for tax deductions on 1986 returns.
IRA Activity Slow
Investment authorities have said that IRA activity has been notably slow this year. Tax law changes made 1986 the final year for which many IRA customers could deduct their contributions. But mutual funds and other IRA promoters say activity always picks up in the final weeks before the deadline.
Remarkably, one factor that has almost always accompanied such sharp moves in stock prices was largely missing from Friday’s market: program trading, the computer-driven buying and selling of stocks and stock index futures and options.
Program trades, through which millions of dollars are mustered for nearly instantaneous large-scale transactions, have been responsible for most of the record one-day gains and losses in the Dow Jones average in the last two years.
Fully Invested
But program traders said Friday that earlier opportunities had drawn them into the stock market to the limit of their resources. “Why wasn’t I doing program trades? Because I’m already fully invested and I don’t have any more cash,” said Courtney D. Smith, director of futures for the New York money-management firm of Twenty-First Securities.
Other major market indexes rose strongly but, besides the Dow industrials, only the American Stock Exchange composite index closed at a record high, rising 5.22 points to close at 340.46.
