Commodities Again a Factor : Dow Advances 22.41 as Inflation Fears Ease
Wall Street stocks rallied Tuesday as a drop in commodity prices dispelled some of the market’s recent fear of inflation.
The Dow Jones industrial index gained 22.41 to 2,130.87, recouping part of Monday’s 34.50-drop.
Tuesday’s session was a mirror reversal of what took place Monday, when stocks and bonds fell on reports of a five-point surge in the Commodity Research Bureau’s index of commodity futures, analysts said.
The CRB index, a gauge of future inflation, was down 3.32 at 267.20 in late trading.
Welcome forecasts of rain in the parched Midwest raised hopes that prices of agricultural goods, which fell Tuesday, would decline further.
Constructive Forces
“We had a reversal of yesterday in the commodities and bond prices,” said Bill King, chief U.S. trader at Nikko Securities. The 30-year Treasury bond was up nearly a point, lowering its yield to 8.88% from 8.97% Monday.
Stockbrokers said the market also got a lift from the dollar’s surprising strength.
“All the forces are very constructive,” said Bill Bee, a trader with Prudential-Bache.
Advancing shares outnumbered declines 967 to 516 in thin trading of 152.37 million shares on the New York Stock Exchange.
Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 175.25 million shares.
Nikko’s King said heavy purchases of well-capitalized stocks such as International Business Machines suggested that some managers were engaged in “window dressing,” hurrying to invest in shares before the end of the quarter.
“When you have to put money into the market the best vehicle is IBM--it’s well capitalized and gives you flexibility,” King said.
“We had a pretty vigorous market, especially in some of the export industries, such as machinery, paper and chemicals,” Stovall said.
Stovall said the day’s low volume was typical of the sessions preceding a holiday weekend.
Among the actively traded stocks, IBM added 2 to 127, increasing its gain in the past week to nearly 10 points and giving some impetus to the technology group. Compaq Computer rose 3 to 63; Apple Computer added 1 3/4 to 46, and Seagate Technology climbed 1 to 18.
Data General gained 1 3/8 to 24 on rumors that Unisys was interested in acquiring the company. Unisys had no comment, and Data General said it was unaware of any takeover moves.
Kimberly-Clark, a rumored takeover candidate in recent weeks, rose 1 5/8 to 61 3/4. The company would not comment on the stock’s advance.
Deere & Co. rose 1 1/8 to 45 1/2 after analysts said First Boston recommended the stock.
Analysts credited a surge in the stock of Beverly Enterprises to speculation that the Pritzker family’s interest in the firm may result in a buyout or restructuring. The stock rose 1 1/2 to 7.
Community Psychiatric Centers shares rose 1 1/2 to 25 on expectations that the company would report strong second-quarter earnings Thursday. Salomon Bros. analyst Margo Vignola said she expected the company to earn 41 cents a share, a 14% rise over corresponding 1987 levels.
Prices Rise in London
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,987, compared to 2,859 Monday.
Stock prices in Tokyo finished lower Tuesday, reflecting concern that domestic interest rates will rise in a bid to shore up the yen.
The Nikkei index lost 36.92, or 0.13%, to 27,398.09. It fell 121.20 Monday.
In London, share prices rose. The Financial Times-Stock Exchange 100-share index gained 15.4, or 0.8%, to close at 1,856.9.
Trading volume totaled 386.7 million shares, compared to Monday’s 390.7 million shares.
