The stock market rose Tuesday in what analysts described as a reflex response to last week’s sharp decline.
The Dow Jones average of 30 industrials rose 8.03 to 2,258.39.
In nationwide trading of New York Stock Exchange-listed stocks, advancing issues outnumbered declines by about 9 to 5.
Big Board volume totaled 147.43 million shares, up from 139.90 million in Monday’s session.
“It’s kind of a physical, knee-jerk pop,” said Larry Wachtel, an analyst for Prudential-Bache Securities Inc.
Newton Zinder, market analyst at Shearson Lehman Hutton Inc., said the buying in the final half-hour was probably from index fund managers, who must put new money to work by the end of the month.
But Zinder said a significant move is unlikely until investors develop a conviction about where the economy and credit rates are heading. “There’s a lack of interest; it’s a floundering market,” he said.
Market watchers cautioned against attaching undue significance to a pair of government economic reports released Tuesday, because they referred to a past period.
‘Looking for Excuse’
The Commerce Department reported that the economy grew at a sluggish annual rate of 2% in the final three months of 1988 as the worst deterioration in the trade deficit in more than two years offset unexpected strength in consumer spending.
The trade shortfall climbed to $32 billion in the period, as both U.S. exports and imports hit record levels.
“I wouldn’t read too much into this whole thing,” said Michael Metz, an analyst for Oppenheimer & Co. “They (stock traders) are almost looking for an excuse to rally.”
Despite the news of sluggish growth in the fourth quarter, the market’s underlying anxiety about inflation persists, analysts said. That concern was a big factor in last week’s slide, which hammered the Dow Jones average down 79.28 points.
Prudential-Bache’s Wachtel said interest rates are calling the tune on Wall Street and that the market probably will not move higher until “investors see some evidence of an economic slowdown and a perception that the Federal Reserve can begin to relent.”
The market’s sensitivity to the inflation and interest rate outlook was suggested by a brief, early afternoon surge among blue chips after comments from Fed Chairman Alan Greenspan that suggested inflation-fighting zeal. But stocks were unable to sustain the gains, and futures-related selling took the bloom off the rally.
Mixed Foreign Trading
Wachtel said the market is also focusing on the possibility of a further increase in the prime rate and on the government’s employment report due at the end of next week.
Among actively traded issues on the NYSE, Texaco rose 7/8 to 51 7/8, AT&T; was up 1/8 at 30 1/4, Coca-Cola advanced 7/8 to 47 3/4 and Columbia Pictures, the subject of revived takeover speculation, jumped 1 to 16 3/4.
US Shoe fell 1/2 to 19 1/2, continuing Monday’s slide. Traders’ expectations of a possible takeover or other transaction were chilled Monday by news that the company agreed to sell its footwear division.
Emhart slipped 1/8 to 40 1/4; General Electric was down 1/4 at 45 3/4; IBM declined 1/8 to 121 1/2, and Burlington Resources dropped 1 5/8 to 46.
Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 178 million shares.
The Wilshire index of 5,000 equities finished at 2,857.863, up 8.422 from Monday’s close. The NYSE’s composite index of all its listed common stocks rose 0.54 to 162.49.
Standard & Poor’s industrial index advanced 1.24 to 333.48; its 500-stock composite index was up 1.04 at 288.86.
The NASDAQ composite index rose 0.77 to 399.71; the American Stock Exchange index closed at 322.47, up 1.05.
Stock prices plunged across the board on the Tokyo Stock Exchange with the Nikkei 225-share index losing 300.17, or 0.94%, closing at 31,985.60.
Stock prices on the London Stock Exchange rallied to close higher but trading was thin. At the close, the Financial Times 100-share index was up 5.7 at 2,002.4, its best level for the day.