Treasury Bonds, Dollar Help Dow Climb 20.09
Wall Street broke free of the doldrums Tuesday, rallying on strength in the dollar and Treasury bonds.
The Dow Jones industrial index ended at 2,101.53, up 20.09. The advance was the largest since Oct. 20, when the index rose 43.92 to 2,181.19.
Advancing issues outnumbered decliners 12-to-7 in nationwide trading of New York Stock Exchange-listed stocks. Big Board volume was 127.42 million shares, up from 123.48 million Monday.
Early activity was erratic. Stocks tracked bond prices for most of the day, as they have for some time, traders said. Bonds started the day lower after the Commerce Department said the U.S. economy grew at a 2.6% rate between July and September, slightly faster than the previously estimated 2.2%.
But the rise was less than expected and bonds soon moved higher, paving the way for a rise in stocks. Analysts said the bond market was helped by a slight drop in oil prices and an easier federal funds overnight-lending rate than of late, as well as a permanent addition of money into the banking system by the Federal Reserve.
“I think the negatives are all on the table,” said Ralph Acampora, a market analyst with Kidder, Peabody & Co. “Everyone who wanted to sell, sold.”
Help From Program Buying
With those negatives--such as rising interest rates--discounted by investors, the market had a better tone, Acampora said.
“Each passing day we get some more encouraging signs from the market. The breadth of the market is starting to respond, and it looks better than it has for the past few days,” said market analyst Hugh Johnson of First Albany Corp.
Analysts said program buying also added fuel to the rally, but Tuesday’s low volume was evidence that traders were still mistrustful.
“No one believes it,” Acampora said. “They won’t believe it until it has muscle.”
Many investors were on the sidelines, waiting for Friday’s unemployment figures from the Labor Department, which might give some clue as to whether the Fed will tighten or relax credit.
Michael Metz, an analyst with Oppenheimer & Co., said the market expected the Fed to raise its discount rate.
Maker of Hoover Tumbles
Among actively traded stocks, RJR Nabisco Inc. rose 1 7/8 to 90 7/8 in heavy trading just before a deadline for submitting bids to acquire the company.
Chicago Pacific, which makes Hoover vacuum cleaners, sank 4 7/8 to 50 1/4 on concerns about the value of its merger with Maytag Corp. Maytag said it received 90.7% of Chicago Pacific shares in response to its tender offer and that it accepted 48.8% of the shares tendered through a friendly merger. Shares not accepted for cash will be paid in Maytag stock, but a last-minute conversion of debentures to stock boosted Maytag’s outstanding shares.
Among blue chip winners, General Motors was up 1 5/8 to 83 7/8, Ford Motor picked up 1 3/8 to close at 51 1/4, Procter & Gamble jumped 1 1/8 to 81 5/8 and Coca Cola rose 1 to 43.
Stocks also rose sharply in Tokyo as stability returned to the oil market after an OPEC agreement cutting the cartel’s oil output by 20%. The Nikkei 225-share index rose 334.98, or 1.2%, to close at 29,318.30, regaining most of the losses suffered Monday because of expectations of higher oil prices.
On the London Stock Exchange stock prices rose in quiet and cautious trading with interest concentrated in a few stocks. The Financial Times 100-share index rose 5.4 to 1,786.9.
