Stock Prices, Rebounding in Late Trading, Continue Rally; Dow Up 18
The stock market finished higher Tuesday after rebounding briskly late in the session.
The Dow Jones index of 30 industrials jumped 18.21 to 2,342.32, its highest close since the October, 1987, market crash and its third-straight finish over 2,300 since the collapse. The widely watched blue chip barometer had lost as much as 15 points earlier in the day.
Advancing issues outnumbered declines by nearly 2 to 1 in New York Stock Exchange trading.
“This is a market that shows resilience,” said Monte Gordon, director of research at Dreyfus Corp.
The comeback reinforced market players’ belief that many foreign investors and U.S. institutions have been reassured by a strong dollar and apparently sound economy--and are ready to jump on the Wall Street bandwagon that began rolling last week.
“I remain bullish on the market,” said Peter DaPuzzo, manager of the retail equity group at Shearson Lehman Hutton. “I think the ingredients are still there for the market to continue with the rally.”
Big Board volume totaled 194.05 million shares, up from 167.83 million in Monday’s session.
Analysts said the market weakened early Tuesday from profit taking in the aftermath of last week’s impressive rally, which continued Monday.
Wall Street’s bullish enthusiasm also was dampened somewhat by comments Tuesday by Federal Reserve Board Chairman Alan Greenspan, analysts said. Among other things, Greenspan told Congress’ Joint Economic Committee that the potential threat of inflation persists in the economy.
After the market tested lower levels, however, it bounced back late in the day and again showed the strength marking its recent rally. As the Dow Jones index of 30 industrials fell toward the 2,300 level, a massive buying surge was triggered.
Stock prices ended mixed in Tokyo, helped by last-minute buying that wiped away early losses. The 225-share Nikkei index firmed 13.80 points to 31,581.30, against Monday’s 111.57-point loss.
Despite the depressing effect of early weakness on Wall Street, share prices on the London stock exchange continued to surge ahead. At the close of trading, the Financial Times 100-share index was up 8.9 at 2,051.8.
CURRENCY
The dollar surged to three-month highs after Greenspan said the U.S. trade deficit would shrink in coming months without a decline in the dollar’s value.
Gold prices, meanwhile, fell to their lowest level in two years, continuing the downward trend that began last Friday when they broke below $400 an ounce.
Greenspan also said the Fed’s efforts to boost interest rates would not lead to a recession but would extend the current expansion by keeping inflation under control.
Currency dealers took the remarks to mean that the U.S. central bank was unconcerned by the dollar’s recent rise and was willing to keep interest rates tight, something that would make dollar-denominated investments attractive.
“It was Greenspan today,” said Kathryn Curtin, assistant treasurer of the National Australia Bank Ltd. in New York.
Dealers have been focusing on firm U.S. interest rates this year rather than the budget and trade deficits that preoccupied them last year.
The price of gold fell sharply in New York after having been little changed earlier in the Far East and Europe.
“The (precious) metals have just done nothing for so long and they have to test their lows before they can go higher. . . . It’s a matter of water seeking its proper level,” said Alan Posnick, senior vice president of MTB Banking Corp. in New York.
On the Commodity Exchange in New York, gold bullion for current delivery fell to $391.60 an ounce from $395.30 Monday. Later, Republic National Bank of New York said bullion was bid at $390.80 an ounce as of 4 p.m. EST, down from $394.35 late Monday.
COMMODITIES
The onslaught of colder weather and an expected drop in meat demand during Lent influenced futures prices for some farm commodities, analysts said.
Grain and soybean prices were up sharply on the Chicago Board of Trade.
Prices were bolstered by unexpectedly high weekly export inspection figures and a report from Sparks Commodities, a private crop analyst, that pegged Argentina’s soybean crop lower than U.S. Agriculture Department estimates, said Victor Lespinasse, a trader in Chicago with Dean Witter Reynolds Inc.
“A weather forecast calling for bitter cold temperatures in wheat growing areas supported the wheat prices,” said Mickey Luth, an analyst with Shearson Lehman Hutton in Chicago.
Livestock and meat futures prices were mostly higher on the Chicago Mercantile Exchange.
Cash prices were helpful for both cattle and hog futures, said Jerry Gidel, general analyst with G. H. Miller, but enthusiasm was limited by the prospect of diminished consumer demand for meat during Lent, a 40-day religious period that begins Feb. 8.
Energy futures prices fell on the New York Mercantile Exchange.
CREDIT
Bond prices barely budged in light trading, feeling upward pressure from a strong dollar but getting held down by Greenspan’s hints that interest rates could rise further.
The Treasury’s benchmark 30-year bond eased about 62.5 cents per $1,000 in face amount, while its yield rose to 8.82% from 8.81% late Monday.
The federal funds rate, the interest on overnight loans between banks, was quoted at 9.125%, unchanged from late Monday.
