Dow Gains 34.15 to Top 1,900 in Blue Chip Rally
Wall Street extended its three-day rally to 135 points and past the 1,900 level of the Dow Jones industrial index Wednesday, as confidence grew that the economy and the market have survived the October crash.
A heavy wave of stock buying propelled the Dow index 34.15 points higher to 1,902.52. The 135-point rise so far this week erases nearly all of last week’s 144-point slide.
Broader indexes also gained, but the rise was confined mainly to blue chip stocks, and that was reason to remain cautious about the market, analysts said.
As expected, the market opened lower on profit taking. But unlike the late surges that drove the market higher Monday and Tuesday, stock prices advanced early on, pushing the Dow up as much as 45 points.
Although the market struggled to hold onto gains late in the session, analysts remained pleased with its ultimate performance.
“All in all (the market) gets good marks . . . not only for today but for all week,” said Eugene Peroni, an analyst with Janney Montgomery Scott Inc. in Philadelphia.
The market vacillated near the close “because of the important news coming,” Peroni said in reference to October merchandise trade figures due out today.
Technical Rally
The consensus on Wall Street is that the trade deficit will fall to somewhere between $14 billion and $16 billion. Analysts predicted that a figure at the lower end of the forecasts would provide the necessary stimulation to sustain recent gains.
“If (the rally) carried over into secondary issues, I’d be happy,” said William Howard, a vice president with Sutro & Co. in San Francisco. “But this is a technical rally in a bear market . . . and I don’t think the general public is involved,” he said.
Advancing issues outpaced decliners by more than 2 to 1 in the overall the New York Stock Exchange-listed shares, with 1,119 issues up, 501 down and 381 unchanged.
Volume on the Big Board came to 231.43 million shares. But analysts said much of the volume was attributed to computer-guided purchases and investors who snapped up equities to lock in dividends.
“There was not a lot of breadth” in Wednesday’s rally, Peroni said. “Participants have a very select shopping list and are sticking to that basket for some time.”
“There is a feeling that the economy is not going into a recession and that the consumer will not dive into a hole,” said Monte Gordon, research director of Dreyfus Corp.
Some analysts cautioned against reading the week’s performance as signaling “a permanent change in psychology.”
Peroni was more bullish. “The market has a more positive underlying thread of confidence that has been missing for weeks,” he said. “The buying seems to be a little more calculated and with greater conviction than there has been.”
Wall Street’s less gloomy psychology, Peroni contended, means that investors will be influenced by a wider variety of market factors, rather than reacting to single pieces of news.
Peroni said the market was “slowly regaining its equilibrium” as investors refocus on such market factors as higher corporate earnings.
In the over-the-counter market, a power outage knocked out the main computer that runs the NASDAQ system from Trumbull, Conn., at around 10:43 a.m. EST Wednesday, disrupting trading for about three hours and leaving brokerage firms across the country in the dark.
The system started to come back on line by 12:05 p.m. through a backup computer facility in Rockville, Md. Most service, including current price information and volume, was restored by 2:30 p.m.
Among the most actively traded Big Board issues, IBM was up 2 1/2 to 114, General Electric climbed 1 5/8 to 43 7/8, Hewlett Packard added 1 3/8 to 52 3/4, Eastman Kodak rose 1 to 47 7/8 and Exxon was down 3/8 to 39 1/2.
In London, the Financial Times-Stock Exchange 100-share index closed at 1,639.3, up 14.9 from Tuesday’s close.
On the Tokyo Stock Exchange Wednesday, the Nikkei share index closed down 62.64.
In trading today, the Nikkei index closed the morning session at 23,066.18, up 180.48 points for a gain of a little less than 1%.
