Dow Climbs 6.93 Despite Profit Taking
The stock market was able to string together a rally in the last minutes of trading Wednesday that lifted the market to another post-crash high and reversed a day-long profit taking trend.
The Dow Jones industrial index, which was lower most of the day, turned higher in the last few minutes of trading to close up 6.93 points at 2,131.40, the highest close since Oct. 19.
In the past two weeks, the Dow has advanced 175 points and analysts predict the market will move higher before the traditional “summer rally” stalls.
Advancing issues outnumbered declines by about 8 to 7 in nationwide trading of New York Stock Exchange-listed issues. Volume on the NYSE came to 150.26 million shares, down from Tuesday’s 227.15 million.
The market was expected to retreat as traders cashed in on Tuesday’s run-up, which was sparked by a better than expected trade report for April.
“It was a stubborn market,” said analyst Michael Metz of Oppenheimer & Co. “It refused to give up ground all day.” He said he believes that there is enough liquidity to bring the Dow close to 2,400 points before the summer rally ends.
However, Charles Jensen, chief technical analyst at MKI Securities Corp., said: “We’re overdue for a pretty nice correction.”
“Investors liked the way the market was acting all day, not falling hard to profit takers, and they came in at the end,” a trader said.
Selling Pressure Low
The market was off for most of the session, mirroring some softness in the bond market, but some traders were surprised it did not move lower. At the day’s low, the Dow was off only about 6 points.
Analysts said the profit taking that occurred appeared light and orderly throughout the session, and most agreed it would not harm the so-called summer rally.
“There was some pausing and some restraint rather than any heavy profit taking,” said Eugene Peroni, a technical analyst at Janney Montgomery Scott in Philadelphia.
“The selling pressure is quite low,” he noted. “Volume dries up considerably when any selling comes in.”
The overall tone in the market remained cautiously optimistic. Traders said money managers, who have an unusually high amount of cash on hand, are under pressure to purchase equities for their portfolios before the end of the quarter.
These institutional investors have had little opportunity to jump into the market over the last few weeks and are anxious to “get money into the market,” said Alfred Goldman, director of technical market analysis at A. G. Edwards & Sons Inc. in St. Louis.
“That momentum will keep the market rallying moderately higher,” he said.
Dealers said the market had little interest in government reports that showed retail sales rose a scant 0.1% and industrial production rose 0.4%, both seasonally adjusted, in May.
Zenith Advances
Metz said that although the retail report did not spark an immediate reaction, it addressed investors’ phobias about inflation and high interest rates. “It suggests the consumption boom is slowing and the Fed (Federal Reserve) doesn’t have to tighten credit,” Metz said.
Among actively traded issues, Texaco was down 1/2 at 49 7/8. Rumors were circulating about whether proxies were traded along with the 7.7-million-share block of Texaco stock that changed hands Tuesday. It was not known whether Carl C. Icahn, who is trying to acquire the oil giant, orchestrated the purchase.
Zenith was up 2 3/4 at 27 1/8. The International Brotherhood of Electrical Workers said it is interested in bidding for some or all of the company’s consumer electronics division through an employee stock ownership plan.
Elsewhere, IBM was up 1/8 at 118 7/8, General Electric was down at 43 1/2, Woolworth was up 2 at 54 7/8, Hewlett-Packard was off 2 at 53 3/8 and General Motors was up 1/2 at 80 1/8.
The Wilshire index of 5,000 equities closed at 2,725.216, up 2.299.
The NYSE index was up 0.15 at 154.67.
Standard & Poor’s index of 400 industrials rose 0.26 to 317.36, and S&P;’s 500-stock composite index rose 0.15 to 274.45.
At the American Stock Exchange, the market-value index finished at 308.78, off 0.10. The NASDAQ composite index for the over-the-counter market closed at 389.08, up 0.55.
Share prices reached a new high on the Tokyo stock market on news of better-than-expected U.S. trade figures.
The Nikkei 225-share average finished a day of brisk trading at a record 28,093.52 points, up 31.72 from Tuesday’s close.
On the London Stock Exchange, prices closed modestly higher. At the end of trading, the Financial Times 100-stock index was up 3.1 points 1,869.3.
