Dow Zooms 31.87 on Program Trading
Blue chip stocks rose sharply today while the rest of the market lagged in a session skewed by program-trading activity in blue chips.
The Dow Jones average of 30 industrials jumped 31.87 points to 2,607.36, its highest close since it stood at 2,640.18 on Oct. 5, 1987, two weeks before the stock market crash. For the week the average posted a 52.54-point gain.
Advancing issues just barely outnumbered declines on the New York Stock Exchange, with 718 up, 697 down and 529 unchanged.
Big Board volume totaled 174.88 million shares, down from 204.59 million in the previous session.
The NYSE’s composite index rose 1.04 to 187.15.
In early trading on Thursday the market climbed to new highs for the strong rally that dates back to mid-November of last year. But those gains failed to stand up to the pressure of afternoon selling.
Analysts said that reversal served today to dampen some of the enthusiasm stirred up by the market’s impressive advance of late.
The wide swings in blue chip stocks both Thursday and today were attributed in large measure to computer-program activity by professionals closing out positions in options and stock-index futures due to expire after the close today.
Bond prices slumped and interest rates bobbed up early today amid lingering uncertainty about the chances for further easing in Federal Reserve credit policy any time soon.
By late morning, the Treasury’s 30-year bond was off 3/16 point, or $1.87 1/2 cents per $1,000 in face amount. The yield on the credit market’s benchmark bond edged up to 8.14% from 8.13% late Thursday.
The weakness in the credit market occurred despite indications from Fed Chairman Alan Greenspan on Thursday that the central bank has shifted its top priority to avoiding a deep recession from fighting inflation.
Greenspan delivered his midyear report on the economy to Congress and implied that the Fed would push down interest rates if necessary to prevent what he termed an “unnecessary and destructive” recession.
The buying enthusiasm inspired by his comments didn’t last long. By late afternoon on Thursday, the rally was snuffed out by selling due to technical market forces and disappointment about the ambiguity of Greenspan’s statements.
The selling continued today.
Robert Brusca, an economist at Nikko Securities Co. International Inc., said there was a perception in the market that the Fed might think it already has done enough to enliven the economy, which in recent months has sent out sluggish signals.
If this is true, the central bank might not want to drive down interest rates any further until it determines whether the economy needs extra stimulation.
Bond Trading Light
Trading was light in the bond market today, which is typical before a weekend in the summer.
In the secondary market for Treasury securities, prices of short-term governments were down 1/32 point to 3/32 point, intermediate maturities dropped 1/32 point to 1/8 point and long-term issues declined 5/32 point to 3/16 point, according to Telerate Inc., the 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.
The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, declined 1.18 to 1,186.20.
In corporate trading, industrials posted declines also. Moody’s investment grade corporate bond index, which measures total return on a portfolio of 80 corporate bonds with maturities of five years or longer, fell 0.77 to 328.69.