Dow Vaults Past 2,000 on Renewed Optimism
The stock market made a successful assault on the psychologically significant 2,000 mark of the key Dow index Tuesday, but bonds and the dollar did not share in the late upswing.
The Dow Jones industrial index rose 22.71 to 2,005.97, its first finish above 2,000 since suffering a 140.58-point plunge Jan. 8.
The Dow indicator has risen 110.25 in the past five sessions.
“For a market that’s not supposed to go up, that’s a pretty good performance,” said Jack Baker, head of block trading for Shearson Lehman Hutton.
“There is more optimism about the outlook for the economy,” Wall Street analyst Michael Metz said. “Just two weeks ago, the emerging consensus on the street was that we were headed toward a recession.”
Stock analysts were at a loss to explain the market’s strong performance, especially in light of a recent rise in interest rates. Usually, higher rates hurt stock prices by threatening to slow down the economy and by providing an attractive investment alternative to stocks.
Interest rates, after a big rise Friday, continued to climb Tuesday. The yield on the Treasury’s benchmark 30-year bond rose to 8.46% as its price fell about $3.75 for every $1,000 in face value.
Stocks got no help from the dollar, which weakened slightly against most major currencies.
And metals prices--an early warning sign of commodity inflation--rose strongly.
“It’s kind of befuddling,” said Charles Jensen, analyst for MKI Securities Corp. in New York.
Comments by Federal Reserve Board Chairman Alan S. Greenspan did not appear to move the market. Greenspan said in a Washington speech that the economy seems to be in equilibrium and gave no indication that the Fed was ready to change its monetary policy.
A good deal of Tuesday’s advance was associated with rises in stocks of takeover targets.
Slight Edge for Gainers
Big Board volume totaled 135.38 million shares, against 144.86 million in last Friday’s session. The stock market was closed Monday for Washington’s Birthday.
But traders say light volume betrays an edginess over investment decisions in a market where perceptions of the economy change so rapidly.
Advancing issues outpaced declining ones by 880 to 620 on the New York Stock Exchange, with 487 stocks unchanged.
Firestone shot up 9 to 45. The company said it planned to spin off its worldwide tire business into a joint venture to be 75% owned by Tokyo-based Bridgestone Corp.
Publishing companies were higher on takeover speculation after Pearson Plc’s $283-million deal Monday to buy Addison-Wesley. Houghton Mifflin rose 3 7/8 to 31 7/8, and Grolier rose 1 1/8 to 13.
Santa Fe Southern Pacific rose 7/8 to 45 1/2 in heavy trading. Olympia & York, the Canadian developer, began a tender offer to increase its stake in the company by up to 14 million shares.
Federated Department Stores jumped 3 1/8 to 63 3/4. Campeau Corp. said it was prepared to offer $66 a share to acquire the company.
In foreign trading, prices on the London Stock Exchange finished slightly lower as continued hesitancy by institutional investors overshadowed better-than-expected economic figures. The Financial Times 100-share index closed down 4.6 at 1,734.6.
In Tokyo, the Nikkei 225-share average closed up 138.19 at 24,345.66.
