Dow Leaps 27.69 in Blue Chip Rally : Program Trading Spurs Stock Prices in Quiet Market
Blue chip issues moved sharply higher on Friday as stronger bond prices and computerized program trading provided a positive end to a frustrating week in which several promising rallies collapsed.
Trading remained quiet, however.
The Dow Jones industrial index closed up 27.69 at 2,015.09, regaining the 2,000-point level. But for the week, the index eked out only a 1.16-point advance.
Advancing issues outnumbered declines by about 9 to 5 in New York Stock Exchange trading. Volume totaled 152.52 million shares, down from 168.44 million in the previous session. The NYSE’s composite index gained 1.78 to 147.02.
Traders said the market was helped by technical factors and was aided by bargain hunting after the recent setbacks.
A rise in the bond market--linked to a government report that U.S. durable goods orders in March were steady--sparked futures-related buying in stocks. The report provided evidence that the U.S. economy is not overheating as some investors have been fearing, traders said.
In the bond market long-term government bond prices rose modestly, dropping the yield of the longest Treasury issue slightly below 9%.
The Commerce Department reported that orders for durable goods were flat in March. But it also revised February’s figure to show a 0.1% increase rather than the 1.1% decline reported earlier.
Index Premium Cited
Analysts said futures-related trading became a major, sometimes dominating force this week, partly due to uncertainty about the course of the dollar and interest rates. Brokers said the program activity made many institutions and traders wary of the market.
Larry Wachtel of Prudential-Bache Securities Inc. said the late buying spurt was triggered by a premium in the S&P; 500 index futures. When stock index futures contracts trade at a premium to the cash index on which they are based, it is profitable for traders to sell futures and buy stocks.
“Everyone was waiting for the market to drop late in the session, but in the lull, a premium opened up,” Wachtel said.
Futures-related trading in the past week has produced wild swings in stock prices, scaring off many investors who could lose money unless they react quickly. Even the normally active institutional investors are sidelined, said Ralph Bloch, analyst with Raymond, James & Associates.
Retail buyers have likewise been staying out. “The guy on the street gets the feeling he is playing against a stacked deck,” he said.
A big chunk of the day’s activity came in Southern Co., up 3/8 at 22 5/8, and Cincinnati Gas & Electric, unchanged at 25 5/8.
Analysts said much of the trading in both those high-yielding utility issues involved strategies keyed to their impending quarterly dividends.
Blue Chip Gainers
Trans World Airlines jumped 7 to 35 1/8, recording the day’s best percentage gain. Chairman Carl C. Icahn revived plans to take the company private through an exchange of cash and securities for the about 23% of the stock he doesn’t already control.
Gainers among the blue chips included International Business Machines, up 1 3/8 at 113 3/4; General Motors, up 1 at 73 3/8; International Paper, up 1 3/8 at 43 1/8; General Electric, up 1/2 at 40 1/8, and American Telephone & Telegraph, up 1/2 at 27 1/8.
Xerox rose 3/4 to 53 1/8. The company reported first-quarter earnings of $1.37 a share, against $1.25 a share in the comparable period a year ago.
Intermedics gained 2 3/8 to 31. The company said it asked Goldman, Sachs & Co. to look for a buyer.
Varo Inc. added 1 3/8 to 21 3/4. Scientific Holdings PLC of London said it asked for regulatory approval to increase its stake in the company to 50% or more.
The Wilshire index of 5,000 equities closed at 2,589.548, up 26.536.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 172.52 million shares.
Standard & Poor’s index of 400 industrials rose 4.26 to 302.92, and S&P;’s 500-stock composite index was up 3.72 at 260.14.
The NASDAQ composite index for the over-the-counter market edged up 0.84 to 374.04. At the American Stock Exchange, the market-value index closed at 298.03, up 1.32.
In London, stock prices closed lower Friday, failing to benefit from early gains on Wall Street. The Financial Times 100-share index fell 20.3 points to 1,771.6.
Meanwhile, the Nikkei 225-share index closed at 26,837.12, up 8.96 points, on the Tokyo Stock Exchange.
