Falling Interest Rates Spur Dow to 27.12 Gain
Stock prices staged a broad rally today with encouragement from declining interest rates.
The Dow Jones average of 30 industrials climbed 27.12 points to 2,678.11.
Advancing issues outnumbered declines by more than 2 to 1 on the New York Stock Exchange, with 995 up, 467 down and 499 unchanged.
Big Board volume totaled 159.64 million shares, against 141.93 million in the previous session.
The NYSE’s composite index rose 1.73 to 191.84.
Analysts said that took some pressure off the stock market, which has been weighed down lately by concerns that rates were being pushed higher by a stronger-than-expected economy.
Still, many Wall Streeters remain doubtful that the Federal Reserve will take any further steps any time soon to relax its credit policy.
In the view of most observers, recent evidence suggests that the Fed might be shifting its focus back to restraining inflation in the absence of any signs of an imminent recession.
Bond prices were higher in early trading today as volume remained thin.
The Treasury’s benchmark 30-year bond was up 3/8 point, or $3.75 per $1,000 face amount, at midday. Its yield, which moves in the opposite direction from price, dropped back to 8.22% from 8.25% late Tuesday.
Analysts said prices firmed after dropping to the lower end of their current trading range.
“At those levels, bonds become attractive to some market players,” said Kathy Camilli, economist for Drexel Burnham Lambert Inc. “You can call it bottom fishing that has brought the market back.”
Bond prices closed lower on Tuesday after a revised June report on durable goods provided further evidence that the economy may be stronger than investors thought. Bondholders fear that a growing economy will revive inflation, which erodes the value of such fixed-income securities as notes and bonds. A stronger economy also suggests that the Federal Reserve will not lower interest rates.
Secondary Market
In the secondary market for Treasury bonds, prices of short-term governments were flat to 3/32 point higher, intermediate maturities were up between 1/8 point and 7/32 and long-term issues had gained between 3/8 point and 11/32 point, according to the Telerate Inc. 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 outstanding Treasury issues with maturities of a year or longer, was up 1.91 to 1,171.60.
