Stocks Rebound; Dow Climbs 18.57
A stable dollar, lower interest rates and some positive news about the economy helped push the slumping stock market broadly higher Tuesday.
The Dow Jones index of 30 industrial stocks closed up 18.57 to 1,998.34. The index had earlier zipped to a high of 2,006.47, but its effort to hold above 2,000 was punctured just before the closing bell when International Business Machines, a key component of the Dow index, rapidly sold off, traders said. IBM fell 2 to 105 7/8.
“All we can say now is that we had a bounce back from an oversold condition. We’ll need to see a couple of days of back-to-back rallies before analyzing any more into this,” said Hildegard Zagorski, an analyst at Prudential-Bache Securities.
The broader market also gained ground Tuesday. About 13 stocks rose in value for every six that fell on the New York Stock Exchange, with 1,015 up, 467 down and 482 unchanged.
Volume on the Big Board totaled 152.69 million shares, up from 142.82 million Monday.
Stock prices started out on a strong note with the help of the dollar’s advance in foreign exchange, which, in turn, eased inflation fears and pushed interest rates lower. A sharp decline in the U.S. currency had been largely responsible for the market’s recent losses.
“The fact that the dollar has stabilized and is no longer going into a free fall, that’s a psychological prop,” said Larry Wachtel, market strategist and first vice president at Prudential-Bache.
The dollar was aided in part by reports of central bank intervention.
Hugh Johnson, chief investment officer at First Albany Corp., said a report showing that the index of leading indicators--the government’s chief economic forecasting gauge--gained 0.9% in February also lent support to stock prices. The index had fallen in three of the past four months.
Trend Still Unclear
“Maybe those fears that the economy is going to run out of steam either this year or next year are unfounded,” Johnson said.
Analysts said they were uncertain whether Tuesday’s rally represented a bullish trend or just a much needed respite after three disappointing sessions.
“In light of what we’ve seen in the equity market today . . . much of this action is almost like an oversold bounce,” said Dennis E. Jarrett, a technical analyst for Kidder, Peabody & Co. “It’s too early to say whether it’s sustainable.”
Among most actively traded blue chip issues, American Telephone & Telegraph was up 1/8 at 26 7/8; General Electric rose 1/8 to 41 1/8, and Exxon was down to 42 3/8.
Among the most actively traded stocks, Texaco jumped 3 to 48 after Kohlberg, Kravis, Roberts & Co., the investment banker that leads in taking big companies private, said it was seeking regulatory clearance to buy up to 15% of Texaco common stock.
RJR Nabisco was up 4 1/8 to 52 1/8. The company said it planned to buy back as much as 8% of its stock.
Lucky Stores rose 1 to 49 7/8. American Stores Co. said it was prepared to raise its offer for Lucky to more than $1.9 billion if a friendly merger of the two grocery store chains can be achieved.
Back in the news, J. P. Stevens rose 1 to 64 3/4. Odyssey Partners, in an effort to outdo West Point-Pepperell Inc. in a bidding war for the towel and sheet maker, said it would boost its offer to $64 a share, or about $1.14 billion.
In foreign trading, Tokyo share prices closed sharply higher Tuesday because of aggressive buying that continued from Monday, which marked the beginning of the new stock market fiscal year, brokers said.
The Nikkei index surged 330.38 to close at 25,953.09. It climbed 301.99 Monday.
In the London, the Financial Times 100-share index closed up 18.6 at 1,765.1.
