Economic News Helps Stocks; Dow Climbs 7
Stock prices managed to close with a modest gain in quiet trading Monday, aided by new evidence of a slowing economy.
The Dow Jones index of 30 industrials rose 7.29 to 2,140.47.
Advancing issues slightly outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks with Big Board volume declining to 119.29 million shares from Friday’s 160.24 million and the lightest total since a 113.72-million-share day on Sept. 28.
Stock market analysts said many investors are waiting on the sidelines for further signs of the U.S. economy’s direction. They added that the approach of the anniversary of the Oct. 19, 1987, crash also was unsettling some investors.
The dollar stabilized Monday after sliding last week. The currency rose to 1.8075 West German marks from Friday’s 1.8055 and to 127.05 Japanese yen from 126.55 on Friday.
News from the Federal Reserve that U.S. industrial capacity utilization fell to 83.6% in September, compared to a revised 83.8% in August, was welcomed by both the stock and bond markets as a sign of a cooling economy. The key 30-year U.S. Treasury bond rose 13/32 to 102-22/32, pulling its yield down to 8.87% from 8.90%.
Investors have been worried that the Federal Reserve may have to push interest rates higher to choke off inflation if the economy continues to show signs of overheating.
Possibly Election-Related
But the utilization report was not enough to stir interest. “The market needs cumulative evidence,” said Dreyfus Corp. research director Monte Gordon. “The market still has to have more evidence that the economy is moderating.”
“It could be election-related,” said market analyst David Bennett at Prudential-Bache. Uncertainty about how the U.S. presidential election will be resolved has kept some investors from participating in the market, analysts said.
Investment strategist Donald Hays at Wheat First Securities said the market appeared to be in a tug-of-war with itself. “The market is extremely cheap, but on the other side, you’ve got interest rates still high on the short-term side.”
“As we approach Oct. 19, 1988, it looks to me very little like Oct. 19, 1987,” said Edward Kerschner at Paine Webber Inc. in a bulletin to the firm’s brokers and customers.
Hospital Corp. of America rose 3/4 to 49 in active trading. A special committee of outside directors rejected a $51-a-share buyout bid by management, asserting that there were other parties that might be willing to make a higher offer.
Philip Morris climbed 1 3/8 to 100. The company reported third-quarter earnings of $2.76 a share, up from $2.11 in the comparable period last year.
After the market closed, Philip Morris announced an $11-billion cash tender offer for Kraft Inc. that would be the second biggest corporate acquisition in U.S. history.
Other gainers among the blue chips included Chrysler, up 3/4 at 26 1/8; International Business Machines, up 1 3/8 at 121 1/8, and American Telephone & Telegraph, up 1/8 at 26 3/4.
Foreign Markets Mixed
Unisys fell 1 3/8 to 28 5/8 as traders registered their disappointment over the size of the quarterly earnings gain posted by the company.
Tokyo share prices drifted back and forth in unusually light trading to finally settle lower Monday. The Nikkei 225-share index slipped 37.83 points to 27,268.74.
Share prices on the London Stock Exchange rose as speculation about takeover bids ignited the long-dormant market. The Financial Times 100-share index rose 19.4 points to 1,860.
