Dow Rockets 39.83 to Best Level in 22 Months
Wall Street stocks bounded to their highest levels in nearly 22 months today after an unexpectedly slim rise in June inflation rekindled the market’s July rally.
The Dow Jones industrial average closed up 39.83 points at 2,584.41, its highest finish since Oct. 5, 1987, two weeks before the market’s Crash.
Advancing issues outnumbered declines by nearly 5 to 2 on the New York Stock Exchange, with 1,065 up, 440 down and 483 unchanged.
Big Board volume totaled 215.74 million shares, up from 152.35 million in the previous session.
The NYSE’s composite index rose 2.19 to 187.10.
The market, which had recorded small losses in the two previous sessions, surged on news of a 0.2% rise in the Consumer Price Index for June, the smallest increase in 16 months.
“The CPI was clearly a positive event for traders and investors and particularly for those looking for an excuse to buy stocks,” said A.C. Moore at Argus Research.
Bond Prices Climb
The news that inflation took its smallest upward step in 16 months in June sent bond prices higher and interest rates lower early today.
By late morning, the credit market’s benchmark bond, the 30-year Treasury issue, sported a gain of 19/32 point, or $5.93 3/4 per $1,000 in face amount. The yield on the key bond, which moves inversely to its price, declined to 8.14% from 8.19% late Tuesday.
The bond market almost always rallies on reports of low inflation because high inflation robs value from fixed-income investments.
Worries about inflationary pressures earlier this year had made the central bank keep a tight rein on credit growth. The Fed in recent months relaxed a bit as evidence of economic weakness piled up, but the financial markets have been hoping for a much more lenient credit policy.
In the secondary market for Treasury securities, prices of short-term governments went up by 7/32 point to 5/16 point, intermediate maturities rose 3/8 point to 1/2 point and long-term issues gained 1/2 point to 19/32 point, according to Telerate Inc., a financial information service.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
Yields on three-month Treasury bills fell to 8.15% as the discount declined 7 basis points to 7.89%. Yields on six-month bills went down to 8.07% as the discount dropped 11 basis points to 7.66%. Yields on one-year bills fell to 7.9% as the discount tumbled 13 basis points to 7.38%.
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, paid at maturity.
The federal funds rate, the interest on overnight loans between banks, traded at 9 3/16%, unchanged from late Tuesday.
Meanwhile in corporate bond trading, industrial and utility issues also strengthened. Moody’s investment grade corporate bond index, which measures return on a portfolio of 80 corporate bonds with maturities of five years or longer, rose 0.41 to 329.39.
