Stronger Dollar, Economic News Boost Dow to Post-Crash High
Stocks surged Wednesday on news of a strengthened dollar, positive economic reports and eased pressure on interest rates, boosting the Dow Jones index to the highest level since the crash eight months ago.
“We had a beautiful fire under the stock market today,” said Robert O’Toole, head of over-the-counter trading at Shearson Lehman Hutton Inc. “There’s just a lot of cash out there; it’s coming into play.”
The Dow Jones industrial index of 30 industrial stocks closed up 43.03 points at 2,152.20. The Dow had jumped at the opening bell and advanced strongly. At 1:53 p.m. EDT it surged past the 50-point barrier that automatically triggers the New York Stock Exchange’s post-crash “collar” restriction on computerized trading, aimed at curtailing market volatility.
The restriction helped dampen the rally but the Dow still closed higher, and the 2,152.20 at the end of the day easily eclipsed the previous post-crash high of 2,131.40 set a week earlier. Broader market indexes also rose.
The catalyst for the rally appeared to be a surprising surge in the dollar overseas, caused partly by an impression that leaders of the seven major industrialized nations, who concluded a summit Tuesday, would tolerate a higher value for the U.S. currency.
“The strength of the dollar this morning was what really got things going,” said Leigh Stevens, a strategist at Paine Webber Inc. in New York. “Everything just kicked in.”
Others said the relatively heavy volume and demand for big-name stocks suggested that large institutional investors and money managers were buying to enhance their portfolios before the second quarter ends June 30, a phenomenon called “window dressing.”
It also suggested that foreign investors, lured by the dollar’s sharply higher value, were moving back into U.S. stocks after a prolonged absence.
Government figures showing a lower-than-expected rise in May consumer prices, reported Tuesday, and a decline in May durable-goods orders, reported Wednesday, also benefited stocks by easing fears about inflation and higher interest rates, brokers said. Those reports helped rally bonds and push yields on the closely watched 30-year Treasury bill back under 9%.
Advancing issues outnumbered declines by about an 11-to-4 ratio in nationwide trading of NYSE-listed stocks, with 1,144 up, 413 down and 420 unchanged.
Volume on the floor of the NYSE totaled 217.51 million shares, up from 155.06 million the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trading at regional exchanges and on the over-the-counter market, totaled 250.53 million shares.
Blue chip leader IBM was the most prominent NYSE issue, jumping 2 3/4 to 123. Analysts generally have welcomed the company’s new line of mid-range computers, unveiled Tuesday.
Other blue chips also made notable gains. Boeing rose 1 3/4 to 57 7/8; Du Pont gained 4 3/8 to 92 3/4; International Paper was up 1 7/8 to 48, and Woolworth gained 1 1/8 to 54 3/8.
Interest-sensitive stocks advanced broadly. Chase Manhattan rose 1 to 29; First Boston advanced 2 3/8 to 37 5/8; Household International was up 1 1/8 to 58 3/8, and Merrill Lynch rose 1 to 26.
IBM’s advance helped some other technology stocks, including Compaq, up to 2 to 62 1/2, and Motorola, up 1 to 53 7/8. But Honeywell fell 3 3/4 to 70 1/2 on investor disappointment that the company will take a $23-million second-quarter charge against earnings.
Large blocks of 10,000 or more shares traded on the NYSE Wednesday totaled 4,619, compared to 3,322 in Tuesday’s trading.
The NYSE index of all listed issues rose 2.06 to 155.35
The Wilshire index of 5,000 equities closed at 2,737.506, up 33.455 or 1.24% from the preceding trading day.
Standard & Poor’s index of 400 industrials rose 4.63 to 318.50, and S&P;’s 500-stock composite index rose 3.99 to 275.66.
At the American Stock Exchange, the market value index rose 1.71 to 308.59. The NASDAQ composite index for the over-the-counter market closed at 390.53, up 2.78.
In Tokyo, share prices fell Wednesday on profit taking in moderately active trade although they rose sharply early in the morning session because of the smaller-than-expected increase in U.S. consumer prices.
The Nikkei index of 225 selected issues fell 64.79 points, or 0.23%, to 27,860.78 after a morning high of 28,199.96. On Tuesday, it dropped 213.46 points to close at 27,925.57.
Volume in Tokyo was 1.2 billion shares against Tuesday’s 1.1 billion.
Share prices rose sharply on the London Stock Exchange, boosted by a solid Wall Street opening, but finished slightly below their best levels of the day.
At the close, the Financial Times Stock Exchange 100-share index was up 19.2 points, or 1.03%, at 1,879.3, marginally below the day’s high of 1,879.8.
Trading volume was a relatively robust 521.6 million shares, up from Tuesday’s 380.2 million shares.
Durable goods story, Page 6
