Dow Up 47.58 as Events Put Investors in a Buying Mood
The stock market ran up a strong gain Wednesday, extending a rally it began late Tuesday amid talk of a possible easing of the Federal Reserve’s credit policy.
The Dow Jones index of 30 industrials, up 18.74 on Tuesday, rose another 47.58 points to 1,962.04.
The advance was the biggest since Jan. 4, the first trading day of the year, when the Dow index rose 76.42 points.
Wednesday’s jump fell just short of the new 50-point limit at which the New York Stock Exchange shuts down its automated order system to program traders, a move aimed at maintaining market stability.
Optimistic Tone
Advancing issues outnumbered decliners by about 7 to 2 on the New York Stock Exchange, with volume totaling 187.98 million shares, against Tuesday’s 162.35 million.
Traders said a variety of factors combined to lure investors, including a strong bond market, a stable dollar, and keen interest in stocks of companies that may be ripe for takeover.
“It was real buying this time,” said Trude Latimer, analyst at Josephthal & Co. “The whole tone was very much better and much more optimistic. People were willing to buy when they heard good news.”
The higher bond market was reinforced by hope that the Federal Reserve--whose policy committee met Tuesday and Wednesday--might cut its influential discount rate after the market closes Friday.
A drop in the federal funds rate--used by banks to lend funds to each other to meet overnight reserves--to as low as 4.5% resulted partly from seasonal factors. But it fed hope to eager investors that the central bank would provide sufficient reserves to the banking system to keep economic growth from slowing down too much.
Wall Street was not alone in moving higher. Secondary issues traded over-the-counter and stocks on the American Stock Exchange also rose sharply, revealing the renewed confidence in the market that some investors had been reluctant to show.
Analysts said the market’s improved tone and its close at the day’s highs could presage follow-through buying today, unless selling by “nervous Nellies” reasserts itself.
Brokers said some traders also seemed to be anticipating favorable news in the scheduled report Friday by the Commerce Department on the nation’s international trade balance for December.
While few observers expect another big drop in the deficit between imports and exports, there are widespread hopes on Wall Street that the latest data will be pretty close to the $13.22-billion figure for November, which was down from $17.63 billion the month before.
Gainers among the blue chips included Merck, up 4 3/4 at 158; General Motors, up 3 1/8 at 66; Du Pont, up 2 at 81 7/8; Philip Morris up 2 to 89 7/8, and Procter & Gamble up 1 3/4 to 83 5/8.
Computer and technology issues also moved broadly higher. International Business Machines added 2 1/2 to 111 5/8, Digital Equipment gained 3 to 120 1/2, Hewlett-Packard rose 2 to 57, Prime Computer added 1 to 17 7/8 and AGS Computers rose 1 to 15.
In foreign trading, stock prices finished firmer and near the day’s best levels in London on Wednesday, with a handful of internationally traded stocks pacing the market. The Financial Times 100-share index closed up 11.3 points at 1,718.5.
In Tokyo, the Nikkei 225-share index rose 109.61 to close at 23,771.88.
