Computer Trading Fuels Late Rally : Dow Rises 25.60 on Rumor of Soviet Troop Cut Proposal
Stock prices chalked up their second straight gain Tuesday, benefiting from an unconfirmed report that Soviet leader Mikhail S. Gorbachev, now on a U.S. visit, will offer to cut Soviet troop levels by 30%, a move that would ease economic pressures on both sides and help Washington rein in its budget deficit.
The Dow Jones average of 30 stocks rose late in the day to close with a gain of 25.60 at 2,149.36. With Monday’s gain of 31.48, the index has risen more than 55 points this week.
Advancing issues outnumbered declines by about 8 to 5 in New York Stock Exchange trading, with Big Board volume totaling 158.34 million shares, up from Monday’s 144.66 million.
Prices of long-term government bonds, which move in the opposite direction from interest rates, climbed about $20 for each $1,000 in face value Tuesday.
Radio Netherlands World Service said Gorbachev would offer a unilateral cut in conventional troop levels by 30% during his visit. The radio station’s Moscow correspondent quoted informed Communist Party sources for his report and said the offer would be made to President Reagan and President-elect George Bush.
Under the reasoning that seemed to prevail in the markets, that would in turn stand to reduce inflationary pressures and help the United States deal with its budget deficit.
“There was a rumor going around, completely unsubstantiated, that Gorbachev would propose a 30% reduction in troops. That would be quite bullish for the market. That’s all we know,” said Hildegard Zagorski of Prudential-Bache Securities.
The rally was not broad-based, however, leading some analysts to speculate that it may not be long-lived.
Most of the stock market’s gains came late in the session on a wave of computer program trading.
The market’s latest upswing has also been attributed partly to a new restructuring tactic announced by four large companies Monday and reported to be under consideration by several others.
The deals involve the proposed swap of “unbundled stock units,” or packages of three different types of securities, for large amounts of their outstanding common shares.
The idea drew mixed reviews from analysts and accountants, some of whom criticized it as a gimmick. However some investors evidently saw it as a potential boost to the values put on companies by the marketplace.
In Tokyo, the Nikkei 225-share average rose 54.70 to a record close of 29,669.38 after an intra-session high of 29,767.63. The previous record of 29,665.50 was set in half-day trading Saturday.
Share prices closed higher on London’s Stock Exchange, helped by a string of favorable corporate earnings reports and by a continued good performance on Wall Street. The Financial Times Stock Exchange 100-share index was up 5.8 at 1,767.4 at the close.
