Oil Price Rise Dampens Rally; Dow Gains 8.79
The stock market extended its recent rally Tuesday on an economic report showing steady growth, but a rebound in oil prices late in the day erased part of the gain.
The Dow Jones index of 30 industrials, up more than 20 points on Monday and nearly 17 points in the morning, finished with an 8.79-point gain to close at 2,044.76.
It was the fourth consecutive gain in the market’s best-known indicator. Monday’s close was revised to 2,035.97.
Advancing issues outnumbered losers by about 3 to 2 in the overall tally of New York Stock Exchange-listed issues.
Volume on the Big Board came to 152.30 million shares, compared to 156.95 million shares on Monday.
Before trading started, the government reported that the economy grew at a 2.3% annual rate in the first three months of 1988.
The first-quarter expansion in the gross national product, which followed a 4.8% rise in the fourth quarter of 1987, had been widely anticipated.
Nonetheless, analysts said the market took some encouragement from the fact that the economy had neither bogged down as some had feared after last October’s crash nor accelerated in a fashion that might force the Federal Reserve to restrain it by encouraging higher rates of interest.
Inflation Fears Fanned
“The economy keeps moving along at a modest pace--and the market is moving higher at a modest pace,” said analyst Hugh Johnson of First Albany Corp.
Also, the GNP price deflator, a widely watched measure of the rate of inflation, rose only 2.4%. But inflation worries were rekindled later on talk of progress at meetings of the Organization of Petroleum Exporting Countries in Vienna aimed at bringing non-OPEC producers into a production cutting accord to bolster oil prices.
“The GNP report is a modestly pleasant surprise, given the (low) inflation part--but it’s not all that inspiring,” said Johnson, who said economic concerns and volatile trading are both keeping many investors sidelined.
Jack Solomon, a technical analyst for Bear, Stearns & Co., said the market welcomed the slower rate of growth because “the feeling is no one will be toying with money rates because the economy was overheating.”
Some recent reports of strong first-quarter earnings were also cited as helping stock prices.
But other analysts noted the relatively slow pace of trading, and worried that gains recorded in such an environment could easily be wiped out at the first suggestion of more negative economic developments.
Gene Jay Seagle, director of technical analysis for Gruntal & Co., said the afternoon price pullback followed rumors that non-OPEC members were close to an agreement with members of the cartel on oil production cutbacks that would help keep prices up.
Texaco Most Active
Within an hour, the Dow Jones industrials retreated from being up 16.25 points to being down about three points. The widely watched average recovered in the last hour of trading, however.
Texaco was the most actively traded stock on the NYSE, and it rose 3/8 to 48 7/8 after reporting sharply higher earnings.
Elsewhere in the oil group, Chevron rose 5/8 to 49, Exxon rose to 45, Pennzoil was up 7/8 at 75 1/2 and Amoco rose 7/8 to 79.
Among other widely held issues, American Telephone & Telegraph fell 1/2 to 26 3/4, General Electric fell to 40 3/4, International Business Machines rose 3/8 to 114 and General Motors rose 2 to 76 5/8.
Lucky Stores rose 1 3/8 to 55 3/8. The company has been fighting a takeover bid of $45 a share from American Stores and said it has received other takeover proposals.
But CNW fell 1 to 23 1/8 after announcing that it called off a leveraged buyout.
The Wilshire index of 5,000 equities closed at 2,622.241, up 13.698.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 177.78 million shares.
The NYSE index rose 0.72 to 148.93.
Standard & Poor’s industrial index rose 1.68 to 307.51, and S&P;’s 500-stock composite index was up 1.47 to 263.93.
At the American Stock Exchange, the market-value index rose 2.50 to 301.45. The NASDAQ composite index for the over-the-counter market closed at 377.84, up 2.57.
In foreign trading, the Tokyo stock market closed higher Tuesday. The 225-share Nikkei index closed at 27,246.77, 33.32 points higher than on Monday. The market’s main barometer briefly reached the all-time high of 27,339.14 shortly after Tuesday’s opening, but profit taking thwarted the early morning rally, traders said.
Stock prices also rose sharply in London, as a buoyant New York market injected added confidence into London trading, which already was bullish on takeover news.
The Financial Times-Stock Exchange 100-share index closed up 23.2 points at 1,800.8.
