Dow Snaps Loss String, Climbs 6.30 : Brokerages Cheered for Suspending Own Program Trading
Wall Street snapped a four-day losing streak Tuesday and put the Dow industrials just over 2,000 as investors cheered a decision by several major brokerage houses to give up computer-directed program trading.
Worries about higher interest rates erased some of the positive impact of brokerage houses stopping the controversial practice--at least for their own accounts--that caused so much volatility in the market.
The Dow Jones industrial index, which fell in the past four sessions, finished at 2,003.65, up 6.30. The index had risen as high as 2,011.94, but slipped as low as 1,991.21 before registering the small gain by the closing bell.
Gainers edged out decliners on the New York Stock Exchange, with 745 up, 713 down and 507 unchanged.
Volume on the Big Board came to 131.2 million shares, compared to 166.32 million Monday.
Rally Erodes
The session started off with moderate gains, after the first of what grew to five brokerages announced that they were suspending index arbitrage trading or had recently done so. Index arbitrage takes place when traders using computers play off differences between futures contracts and their underlying baskets of stocks.
It has been criticized as causing wide swings in the market, scaring investors away and contributing to the market’s recent inability to respond positively to favorable news about the economy.
Analysts said the moves--by Salomon Bros., Morgan Stanley & Co., Bear, Stearns & Co.; Kidder Peabody & Co. and Paine Webber Inc.--could have been sufficient to spark a strong updraft, had the will been there. Apparently, it wasn’t.
By early afternoon, the rally was eroding and turned to an overall loss with less than an hour to go. Only a last-minute spate of ordinary buy orders turned the tide, said Jack Baker, head of block trading at Shearson Lehman Hutton Inc.
“If the market really had a chance to go up, this should have been a real opportunity for the bulls to shake, rattle and roll,” said Alfred E. Goldman, a vice president at A. G. Edwards & Sons Inc. in St. Louis. “But the rally was less than puny--from minus 2 points in the Dow to 13 on the upside. What it says is, the overall trend is down.”
Eugene Peroni, director of technical research, at the Janney Montgomery Scott Inc. securities firm in Philadelphia, said he believed that the market was “still floundering. It has no focal point. Most investors are very insecure.”
Among most active issues on the Big Board, Woolworth fell 1 1/8 to 54; Gillette was down 3/4 at 36 3/4, and IBM was up 3/8 at 110 7/8.
In foreign trading, Tokyo share prices rose after three days of losses. The Nikkei 225-share index gained 147.95, or 0.54%, to close at 27,412.25.
In London, stock prices weakened, with the Financial Times 100-share index closing at 1,792.6, compared to Monday’s close of 1,794.9 and a day’s low of 1,783.
