Dow Soars 25.83, Streaking Past Previous Record : Blue Chip Index Easily Outpaces Broader Market
Spurred by strength in a handful of its components, the Dow Jones average of 30 industrial stocks jumped to a record high Tuesday as the stock market again confounded the skepticism that has greeted many of its recent advances.
The closely watched index closed at 2,519.77, up 25.83 points from Monday and well above its previous record of 2,510.04, set July 17.
Some analysts said the move was born out of the market’s own penchant for doing exactly the opposite of what prevailing wisdom would have it do.
They noted that many traders had been stuck in a mire of pessimism and uncertainty in recent days, pointing out that the advance was led by a host of blue chips, while the broader market had not fared as well.
‘A Skeptic’s Rally’
“This was a skeptic’s rally,” said Eugene Peroni, of Janney Montgomery Scott Inc. in Philadelphia. “It seemed that even as skepticism was advancing, the market was undeterred in its quest for new highs.
In fact, of all the listed issues on the New York Stock Exchange, gainers outpaced decliners by only a bit more than 4 to 3, with 899 stocks closing higher, 658 lower and 419 unchanged.
Big Board volume totaled 172.60 million shares, compared to 152.04 million shares Monday.
“The market keeps going up, surprising most analysts who keep thinking it’s going to go down,” said Harry Villec of Sutro & Co. in San Francisco.
“People are uncomfortable with the all-time highs,” Villec said, “but at the moment, there is very little downside risk. August should be a barn-burner.” Villec predicted that by Labor Day the Dow will reach 2,600 or 2,700.
Thomas Czech, research director for the Blunt Ellis & Loewi securities firm in Milwaukee, suggested that Tuesday’s gains were based more on emotions than logic.
“There wasn’t any real reason. There wasn’t anything in the news,” he said. “The main thing is that people were very, very pessimistic. There was a lot of cash on the sidelines, and this is what happens when there is too much pessimism in the market.”
Czech attributed the market’s negative mood to several factors, including higher interest rates in Japan, the fear that this will result in higher rates here and the failure of Congress to set a new ceiling on the nation’s debt.
Leads the Parade
Boeing led the Big Board’s most active list at 53 3/4, up 7 1/8. The company announced Monday that T. Boone Pickens Jr.'s Mesa Limited Partnership had sought regulatory approval to buy up to 15% of its stock.
Merck, which raised its dividend and announced a $1-billion stock buyback, was up 3 5/8 at 188 1/8.
American Express was up 7/8 to 36 1/8. The company said Monday it would buy back as much as 9.3% of its common stock in the next two to three years.
And General Electric was up 5/8 to 57 3/4.
All four issues are components of the Dow Jones industrial average.
Jim Walter Corp, a takeover target, was up 3 points at 61 1/2. Anheuser-Busch gained 1 point to 36 and was the 10th-most actively traded stock on the New York Stock Exchange on a volume of nearly 1.5 million shares. The St. Louis-based brewer said it was “not aware of anything that would cause any unusual stock activity.”
Reuters reported that there were rumors on Wall Street that the Australian company that makes Fosters Lager, Elders IXL Ltd., might make a bid for the brewing giant, but several industry analysts called that unlikely at best. “I would be astonished if an Australian brewer would have the resources to do it,” said Paul Gillette, publisher of Beverage Hotline in Los Angeles. “I would be astonished if the Australian government could do it!”
Bond Brices Sag
In the bond market, prices fell in thin trading as the dollar moved lower against all major currencies and oil prices rose.
The Treasury’s closely watched 30-year bond was down 15/32 point, or about $5 per $1,000 in face amount, while its yield jumped to 8.86% from 8.82% Monday.
Corporate and municipal issues also were lower.
In the secondary market for Treasury bonds, prices of short-term governments were 1/16 point lower, intermediate maturities were 3/16 point to 9/32 point lower and 20-year issues fell 17/32 point, according to figures provided by Telerate Inc.
In corporate trading, industrials and utilities were down point in light trading, according to the investment firm of Salomon Bros.
Among tax-exempt municipal bonds, general obligations were off point while revenue bonds were unchanged, Salomon Bros. said. Trading was light.
Yields on three-month Treasury bills were up 6 basis points to 5.85%. Six-month bills rose 7 basis points to 6.08% and one-year bills rose 4 basis points to 6.39%.
The federal funds rate, the interest on overnight loans between banks, traded at 6.50%, down from 6.56% Monday.