Dow Up 14.80 as Chase Cuts Its Prime Rate

From Times Wire Services

The Dow industrials jumped above the 2,500 level Monday as Wall Street carried an interest rate-inspired rally to its fifth-straight higher finish.

The Dow Jones index of 30 industrials rose 14.80 to 2,502.66, extending its gain since the start of last week to 62.60 points.

Advancing issues outnumbered declines by about 9 to 5 in nationwide trading of New York Stock Exchange-listed stocks.

Volume on the floor of the Big Board came to 131.87 million shares, down from 166.43 million in the previous session.


Chase Manhattan Bank lowered its prime rate to 10.5% from 11% Monday, keeping alive investors’ enthusiasm over the Federal Reserve’s behind-the-scenes maneuvers to push interest rates lower.

The cut in the prime rate was widely expected after Southwest Bank of St. Louis lowered its prime Friday in light of a general decline in interest rates recently.

“It was expected,” said Kidder, Peabody & Co. trader Tom Ryan, referring to Chase’s move. “It would have been highly disappointing if it hadn’t occurred.”

As of late Monday, however, Chase was the only major bank to enact a rate cut.


Investors are hoping that easier credit will prevent a sharp slump in corporate earnings, their latest concern now that worries about interest rate increases and inflation have subsided.

Many investors also are likely to hold off buying stocks this week because no economic indicators are due until the June producer price index is released Friday. Economists expect that wholesale prices will be shown to have risen 0.2% last month, a sharp drop from May’s 0.9% gain.

Tokyo stocks closed mixed in light trading after a sluggish session, and signs that U.S. interest rates might soon fall failed to rally the market beyond a move upward at the open, brokers said. The Nikkei 225-share index eased 27.95 points to 33,676.02 after rising 280.49 on Friday.

On London’s stock exchange, share prices closed higher as the market continued to draw inspiration from takeover speculation. However, trading volume was extremely low, reflecting the absence of strong institutional buying interest, dealers said. The Financial Times 100-share index was up 6.1 points at 2,195.2 at the close.



The dollar declined against several foreign currencies after Chase Manhattan cut its prime lending rate.

Gold prices edged up in U.S. trading after posting minor losses overseas.

Currency dealers sold dollars early in U.S. trading when Chase announced that it was lowering its prime rate.


The impact of the Chase move was muted because financial markets have been anticipating interest rate declines for weeks. Lower U.S. interest rates hurt the dollar by reducing returns on dollar-denominated investments.

In Tokyo, the dollar fell 0.37 yen to 139.28 yen. Later in London, it was quoted at 138.95 yen. In New York, the dollar finished at 139.20 yen, unchanged from Friday’s late level.

In London, the dollar fell against the British pound. It cost $1.6410 to buy one pound, more expensive than the $1.6245 late Friday. Later in New York, it cost $1.6390 to buy one pound, compared to $1.6313 on Friday.

On the Commodity Exchange in New York, gold bullion for current delivery rose to $384.60 an ounce, up $1 from Friday. Republic National Bank of New York quoted a late bid for gold of $382.50 an ounce as of 4 p.m. EDT, 50 cents higher than the late bid Friday.



Bond prices rose, nudged upward by sharp declines in prices of some key commodities as interest rates fell to record lows.

The Treasury’s closely watched 30-year bond rose about 5/16 point, or $3.12 for every $1,000 in face value. Its yield declined to 8% from 8.03% late Friday.

Bond prices benefited from price drops in oil and grain, said Mitchell Held, chief financial economist at Smith Barney, Harris Upham & Co.


The August contract for West Texas Intermediate, the benchmark grade of U.S. crude oil, tumbled 39 cents to settle at $20.36 a barrel on the New York Mercantile Exchange.

Falling commodity prices indicate an easing of inflation, which is an enemy of the bond market.

In the secondary market, prices of short-term government issues edged up 1/16 point to 1/8 point, intermediate maturities rose 3/16 point to 5/16 point, and 20-year issues advanced 5/16 point, according to Telerate Inc., a financial data service.

The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 9.188%, up from 8.875% late Friday.



Corn, soybean and oat futures prices fell on the Chicago Board of Trade in anticipation of cooler, wetter weather in the Midwestern Corn Belt.

Wheat futures finished moderately lower.

On other markets, gold and silver advanced, while energy, livestock and meat futures were mixed.


Wheat settled 4 to 5.5 cents lower, with the contract for delivery in July at $3.995 a bushel; corn was 2.25 to 13.75 cents lower, with July at $2.635 a bushel; oats were 10.25 to 11.5 cents lower, with July at $1.47 a bushel; soybeans were 18.5 to 32.5 cents lower, with July at $7.4375 a bushel.

The declines in the corn, oat and soybean markets exceeded the normal daily price limits in those markets, which are, respectively, 10 cents, 10 cents and 30 cents a bushel. The Board of Trade had raised the limits by 50% following limit-up moves in all three markets last Wednesday. The limits return to normal today.

Tables begin on Page 12