Dow Spurts 25 to Highest Level Since Oct. 19 : Unexpected Drop in Trade Deficit Credited

Wall Street’s Dow industrials rallied Tuesday to their best levels since the October crash as investors cheered an unexpectedly big drop in the nation’s monthly trade deficit.

The Dow Jones industrial average finished up 25.07 points at 2,124.47, easily surpassing the post-crash closing high of 2,110.08 set on April 12. The blue chip index is now 22% below its August, 1987, peak and nearly halfway back from its October lows.

Advancing issues outnumbered declines by about 5 to 2 in nationwide trading on the New York Stock Exchange.

Volume on the floor of the NYSE came to 227.15 million shares, up sharply from 125.31 million in the previous session.

‘Plenty of Sizzle Left’

Analysts were impressed with the market’s performance. “It was a good show, and the best is yet to come,” said Michael Metz, a vice president and technical analyst at Oppenheimer & Co., noting that “there’s still room on the upside.”

“There’s plenty of sizzle left,” said market analyst Alan Ackerman of Gruntal & Co. “The (market’s) near-term potential is not fully exploited.”

The Dow jumped as high as 2,138 in the first 30 minutes of trading after the Commerce Department reported that the seasonally-adjusted trade deficit fell to $9.89 billion in April, its lowest level in more than three years and far below the $12-plus billion that market watchers had been anticipating.

The report also sparked a rally in the bond market and helped push the dollar higher against the major currencies.

Analysts noted that the markets embraced the trade report because it showed a decline in exports, which eased by 2.5% and worked to dispel concerns that the economy is expanding too quickly. Imports declined by 6.4% in April.

“The trade figures suggest the consumer boom is slackening but manufacturing activity is rising, which is ideal,” said Metz, who predicted “a soft landing from fears of inflation and an overheated economy.”

Broad-Based Buying Spree

Another New York analyst said: “It’s a good number and it’s a good number for all the right reasons. The drop in imports was very broad-based, occurring in all the major product groups.”

The Dow average, which had been flirting with the 2,100 mark for weeks, decisively pierced that point at the opening, and traders watched closely as the key index ticked past incremental barriers. The buying spree was broad-based throughout the session.

“The blue chips basked in all this strength, but there is greater growth and percentage opportunities in the medium-capitalization stocks, and they also performed well,” noted Eugene Peroni, a technical analyst at Janney Montgomery Scott in Philadelphia.

While cash that had been sitting on the sidelines for weeks poured into the market, analysts noted that the enthusiasm had some bounds.

“There’s still a lot of skeptics in the background, which is a bullish phenomenon in and of itself,” Metz said.

Among actively traded issues, IBM rose 1 3/4 to 118 3/4, Ford Motor was up 1 1/8 at 52 1/2, Matsushita was up 3 5/8 at 211 1/8, Dow Chemical was up 2 7/8 at 90 and Digital Equipment was up 1 3/8 at 113 1/2.

Philip Morris was off 1 3/4 at 83, and RJR Nabisco was off 1 at 47. Tobacco stocks were expected to come under pressure after a jury in New Jersey on Monday ordered a tobacco company to pay damages for the death of a smoker.

Texaco was down 1/8 at 50 3/8. Traders were curious about who purchased a block of about 7.7 million Texaco shares that traded hands early in the session.

Indexes Rise

The Wilshire index of 5,000 equities closed at 2,722.917, up 24.197 from Monday.

The NYSE index was up 1.50 at 154.52.

Standard & Poor’s index of 400 industrials rose 3.18 to 317.10, and S&P;’s 500-stock composite index was up 2.87 at 274.30.

At the American Stock Exchange, the market value index rose 0.74 to close at 308.88. The NASDAQ composite index for the over-the-counter market closed at 388.52, up 1.71.

In foreign trading, the Tokyo stock market’s key indicator closed slightly higher Tuesday. The Nikkei 225-share average rose 25.26 28,061.80, the highest since it closed at a record 28,072.02 points on Thursday.

Share prices ended sharply higher Tuesday on the London Stock Exchange following a surge on Wall Street that stemmed from the better-than-expected U.S. trade report for April. The Financial Times 100-share index ended up 27.4 at 1,866.2.