Dow Rockets 31.79, Cheered by News of Inflation Slowdown
The stock market ran up another strong gain in heavy trading today, capping off the best week so far in a rally that began more than two months ago.
The Dow Jones average of 30 industrials climbed 31.79 to 2,322.86, bringing its gain for the week to 87.50 points.
Advancing issues outnumbered declines by nearly 2 to 1 on the New York Stock Exchange.
Big Board volume came to 254.87 million shares, against 212.25 million in the previous session.
The NYSE’s composite index gained 1.18 to 164.78.
Before the market opened, the Commerce Department estimated that the gross national product grew at a annual rate of 2%, after adjustment for inflation, in the fourth quarter of last year.
Fresh Evidence
The figure came in below most advance estimates on Wall Street and provided a fresh bit of evidence for the case that the economy was slowing to a sustainable, not-very-inflationary pace.
Bond traders welcomed the news by bidding up prices of long-term government bonds about $5 for each $1,000 in face value.
That, in turn, provided fresh momentum for an advance in stock prices that has already been gathering steam of late.
Brokers said a strong dollar in foreign exchange also helped stir up investors’ enthusiasm for stocks.
Bond prices headed higher in early trading today after the government’s GNP report/
The Treasury’s bellwether 30-year bond rose 5/8 point, or $6.25 per $1,000 in face amount, by midday. Its yield, which moves inversely to its price, fell to 8.74% from 8.79% late Thursday.
Corporate bonds also made gains.
Still, analysts said the fourth-quarter data appeared to suggest that the economy was slowing down a bit, thereby easing fears of higher inflation. Bondholders worry that the Federal Reserve might push interest rates higher to prevent the economy from overheating.
In the secondary market for Treasury bonds, prices of short-term government issues were up around 1/8 point, intermediate maturities rose about 5/16 point and long-term issues gained 5/8 point, according to Telerate Inc., a financial information service.
Slowing Economy
The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on outstanding Treasury issues with maturities of a year or longer, increased 4.09 to 1,143.75.
In corporate trading, industrials rose slightly. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, increased 0.60 to 299.97.
Yields on three-month Treasury bills fell to 8.60% as the discount dropped 2 basis points to 8.32%. Yields on six-month bills were unchanged at 8.82% as the discount held steady at 8.34%. Yields on one-year bills fell to 8.94% as the discount dropped 4 basis points at 8.29%.
A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.
The federal funds rate, the interest on overnight loans between banks, was quoted at midday at 9 3/16%, unchanged from late Thursday.
