Stocks Stage Broad Advance; Dow Up 24.11
Unfazed by disappointing news on international trade, stock prices staged a broad advance Wednesday that carried the market to new highs since the 1987 crash.
The Dow Jones average of 30 industrials climbed 24.11 to 2,238.75, surpassing the recovery peak of 2,226.07 it reached last Friday.
Advancing issues outnumbered declines by more than 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks.
Big Board volume reached 187.54 million shares, its highest level so far in the new year, up from 143.93 million Tuesday.
The Commerce Department reported Wednesday that the nation’s trade deficit widened to $12.51 billion in November from a revised $10.26 billion the month before.
Wall Streeters said they were heartened to see the market shrugging off unfavorable news on the trade situation, which has been a touchy issue for the markets for a long time.
In foreign trading, stock prices climbed to a record on the Tokyo Stock Exchange as investors shrugged off late profit-taking pressure. The Nikkei average of 225 selected issues climbed 127.03 to close at a record 31,354.55.
London stocks also extended their recent broad-based rally in active trading, reaching their best levels since the 1987 stock crash. The Financial Times 100-share index closed up 24.4 at 1,892.1.
CURRENCY
Money traders scrambled to buy dollars Wednesday and boosted the currency despite the surprisingly big monthly U.S. trade deficit, confounding conventional wisdom that when the imbalance grows, the dollar drops.
Moreover, the dollar’s strength grew despite repeated intervention by seven central banks, including the Federal Reserve and West Germany’s Bundesbank.
The dollar declined initially when the trade number was released, but quickly stabilized against key currencies--a signal to professional speculators that the dollar was undervalued and that they should buy it.
The Federal Reserve entered the market at least three times to peddle dollars, but traders said the moves only slowed the dollar’s rise and provided more opportunities for buying what they considered cheap dollars.
CREDIT
Bond prices, also undaunted by the disappointing trade report, surged higher amid speculation that inflation might moderate.
The Treasury’s key 30-year issue finished up 11/16 point, or nearly $7 for each $1,000 in face value. The bond’s yield, which often indicates overall interest rate trends, declined to 8.82% from late Tuesday’s 8.89%.
The credit markets also gained strength from speculation that West Germany’s Bundesbank would increase its discount rate, analysts said.
The federal funds rate, the interest on overnight loans between banks, was quoted at 8.938%, down from 9.24% late Tuesday.
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