FINANCIAL MARKETS : Program Trades Spark Rally; Dow Gains 25.42
The stock market climbed to new post-crash highs Monday, propelled by computer-program buying and falling interest rates.
The Dow Jones index of 30 industrials jumped 25.42 points to 2,660.66, its highest close since it stood at 2,662.95 on Aug. 31, 1987. Several other, broad market indicators surpassed record highs they reached last week.
The Dow finished July with a net gain of 220.60 points for its strongest monthly performance since it soared 252.09 points in January of 1987.
Much of the day’s gains came in two rounds of buying ascribed to activity by professionals engaged in computer-program strategies involving stocks and stock-index futures and options.
Advancing issues outnumbered declines by more than 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 1,054 up, 490 down and 462 unchanged.
Volume on the floor of the Big Board came to 166.65 million shares, down from 180.61 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 199.86 million shares.
Coca-Cola picked up 4 1/2 to 68 on word that investor Warren E. Buffett, who holds a 6.75% stake in the company, is seeking clearance to buy as much as 15% of the stock.
Chrysler Corp. rose 1/2 to 24 3/8. The company reported second-quarter earnings of $1.46 a share, up from $1.45 in the like period last year.
Elsewhere among the blue chips, American Telephone & Telegraph gained 1/2 to 40 5/8, International Business Machines rose 1 5/8 to 115, Philip Morris jumped 3 1/2 to 158 1/2 and General Electric advanced 1 to 58 1/2.
The Tokyo Stock Exchange’s main index bounced back from Friday’s losses and closed at a record high Monday. The 225-issue Nikkei stock average gained 248.24 points, or 0.72%, closing at 34,953.87. It had declined by 79.65 points last Friday.
Yoshio Shimoyama, a senior dealer at Nikko Securities, said the index climbed on the yen’s sharp rise against the dollar and expectations of lower interest rates.
Bank stocks were strong as well. J. P. Morgan rose 1 1/4 to 41 1/8; BankAmerica 1 1/4 to 32; Manufacturers Hanover 1 3/8 to 43 3/8; Bankers Trust New York 1 7/8 to 55 1/4, and NCNB 1/2 to 53 1/2.
Large blocks of 10,000 or more shares traded on the NYSE totaled 3,393 compared to 3,846.
The NYSE’s composite index of all its listed common stocks gained 2.03 to 192.41.
Standard & Poor’s industrial index rose 4.37 to 395.68, and S&P;’s 500-stock composite index was up 3.93 at 346.08.
The NASDAQ composite index for the over-the-counter market added 1.02 to 453.84. At the American Stock Exchange, the market value index closed at 376.56, up 2.05.
Credit
Bond prices headed higher and interest rates declined amid buying inspired by widespread expectations that the Federal Reserve will pursue a more generous credit policy.
The Treasury’s 30-year bond--the credit market’s benchmark bond--added 1/2 point, or $5 for every $1,000 in face value after gaining nearly the same amount on Friday.
The key bond’s yield fell to 7.95% from 7.99% late Friday, marking the first time the long-term bond’s yield has closed below 8% since the spring of 1987. The yield goes down when the bond’s price rises.
The federal funds rate, the interest on overnight loans between banks, traded at 8 7/8%, down from 8 15/16% late Friday. The Fed controls the rate by adding or subtracting banking reserves, and many economists believe that the Fed has set a new target of 9%, down from 9 1/4%.
Currency
Lower U.S. interest rates sapped strength Monday from the dollar, which fell to springtime levels against major foreign currencies.
The drop in interest rates has wiped out the dollar rally that reached its peak in June, taking the dollar back to levels of May against the British pound and Japanese yen, April against the West German mark and March against the Swiss franc.
The dollar’s sharpest drop came against the yen, which has surged ahead following the brief decline that occurred in the July political upheaval. Traders said there was optimism that Japan’s governing partner would select a new prime minister shortly.
In London, the dollar fell against the British pound. It cost $1.6665 to buy one pound, more expensive than $1.6455 late Friday. In New York, the pound rose to $1.6655 from $1.6527 on Friday.
In Tokyo, the dollar closed at 138.40 yen, down 1.05 yen from last Friday’s close of 139.45 yen. After opening at 138.90 yen, the dollar ranged between 138.15 yen and 139.10 yen.
Gold prices were mixed.
In Hong Kong, gold rose 86 cents an ounce to close at $369.64.
Gold fell in London to a late bid of $368.25 from $369.20 on Friday. In Zurich, Switzerland, gold fell to $368.25 from $369.75.
Commodities
Coffee and soybean prices fell sharply Monday, with coffee sinking to eight-year lows in New York and soybeans traded in Chicago settling at contract lows for most delivery months.
CSCE spot September coffee fell 3.03 cents to close at 78.99 cents per pound, and one broker said prices could fall another 5 cents before rebounding.
Meanwhile, CBOT soybeans futures sank under wave after wave of selling following widespread rains over the weekend in key crop areas.
Adding to market pressure was the growing concern that lower-priced Brazilian soybeans might pull demand from the U.S. market, floor sources said.
Contract lows were set in all but the lightly traded November, 1990, delivery. Spot August soybeans settled at $6.245 a bushel, off 24.5 cents.
Energy futures posted gains as tropical storm Chantal neared the Gulf Coast. Reports that an American hostage was slain in Lebanon also fueled buying in energy futures.
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