Good News on Economy Sends Dow Up 4.75

The stock market finished slightly higher Tuesday after a strong rally fizzled in the final hour of trading.

The Dow Jones index of 30 industrials ended with a gain of 4.75 points at 2,663.94 after climbing more than 21 points during the session. On Monday, the blue chip indicator dropped 22.42 points.

Advancing issues outnumbered decliners by a margin of about 5 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 740 issues up, 634 down and 556 unchanged.

Big Board volume was 158.35 million shares, up from 121.13 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 183.925 million shares.

The market opened broadly higher, aided by a sharp run-up in Japan’s stock market overnight and an unexpectedly strong U.S. government report on durable goods.

The market had recouped most of its losses from Monday, with the Dow Jones industrial index up more than 21 points at one point in the session, before a sharp pullback in the final hour of trading.

“I can’t tell you why it sold off,” said Philip Roth, with Shearson Lehman Hutton Inc. “I don’t know of any news. The market’s technical position for a rally was weak. Stocks were rallying on poor volume and it was destined to fade anyway.”

Computerized trading strategies and buying by big institutions in the final week of the third quarter helped buoy prices during much of the session, traders said.

Among actively traded issues on the NYSE, Columbia Pictures lost 1/8 to 26 1/4, USAir dipped 5/8 to 46 1/4 and Exxon fell 1/4 to 44 1/2.

Paramount Communications rose 1 1/2 to 56 1/4, MCA advanced 2 to 65 5/8 and Orion Pictures added 5/8 to 22 3/4. IBM gained 1 1/4 to 117 1/2 and General Motors advanced 1 1/8 to 48 1/4. Spain Fund showed the biggest advance, gaining 12 to 38 3/4.

In Tokyo, share prices advanced broadly, pushing the Nikkei index up to a record high in active trading. The Nikkei average of 225 selected issues climbed 484.11 points to 35,444.82. The previous record, set Aug. 21, was 35,140.83.

Shares fell sharply in moderate trading in London after the publication of worse-than-expected trade figures for August. The country’s current account deficit was $3.20 billion, the third worst on record.

The Financial Times-Stock Exchange 100-share index finished 23.5 points lower at 2,336.1.

Credit

Bond prices recovered from a steep decline the day before, as a large auction of Treasury notes was absorbed more smoothly than had been expected, analysts said.

The Treasury’s closely watched 30-year bond rose about 1/2 point, or $5 for every $1,000 in face value. Its yield, which falls when prices rise, dropped to 8.23% from 8.28% late Monday.

Bond prices fell sharply Monday after central banks attacked the dollar. The 30-year bond had lost more than a point, its biggest daily decline since mid-August.

Finance officials from the most powerful industrial nations sold dollars from their reserves on Monday and Tuesday, following up their agreement over the weekend that the U.S. currency should not rise from current levels. The dollar dropped sharply as a result.

Average yields on the notes rose to 8.39%, the highest level since May.

In the secondary market for Treasury bonds, prices of short-term government issues were 1/16 point lower to 5/32 point higher, intermediate maturities advanced 7/32 point to 1/2 point, and long-term issues rose 1/2 point, according to figures provided by Telerate Inc., a financial information service.

Yields on three-month Treasury bills rose to 8.01% as the discount jumped 5 basis points to 7.76%. Yields on six-month bills rose to 8.23% as the discount gained 3 basis points at 7.81%. Yields on one-year bills fell to 8.31% as the discount slipped 1 basis point to 7.72%.

The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 9%, down from 9.50% late Monday.

Commodities

A forecast of ideal harvest weather sent some grain futures prices lower, but the selloff helped to bolster cattle prices.

Wheat futures prices moved higher, while soybeans prices tumbled and corn futures were mostly lower on the Chicago Board of Trade. Analysts said the outlook for perfect harvest weather in U.S. growing areas depressed corn and soybeans.

On other markets, feeder cattle prices rose, live hogs gained, precious metals fell and energy prices were mixed.

Jon Horton, an analyst for Research Department Inc. in Chicago, said a lack of any real export demand for soybeans was weighing on futures prices.

Wheat prices, however, were supported by an announcement Monday by the U.S. Agriculture Department of a sale to China of 300,000 metric tons and anticipation of more export business this week, traders said.

Activity in the corn pit was light as traders awaited a USDA grain report Thursday, said analyst Susan Leighty of Prudential-Bache Securities Inc. in New York.

Wheat settled 2 1/4 cents to 4 1/4 cents higher, with December at $3.94 1/4 a bushel; corn was 1 cent lower to 3/4 cent higher, with December at $2.29 3/4 a bushel; oats were 1 1/2 cents to 2 cents higher, with December at $1.43 1/2 a bushel; and soybeans were 1 cent to 6 1/4 cents lower, with November at $5.66 1/4 a bushel.

At the Chicago Mercantile Exchange, futures prices for live cattle soared, while feeder cattle prices were higher and pork complex futures were mixed.

Live cattle futures rallied on higher cash prices in Texas and Kansas, analysts said.

Futures prices for precious metals fell on the Commodity Exchange in New York.