Dow Rallies, Stalls, Rallies Stalls: Gains 7.04 to 2,702
The stock market closed higher today as investors remained focused on the direction of the economy and interest rates.
The Dow Jones average of 30 industrials rose 7.04 points to 2,702.01.
Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, with 818 issues up, 637 down and 531 unchanged.
Big Board volume totaled 153.77 million shares, up from 149.39 million in Monday’s session.
The NYSE’s composite index rose 0.20 to 191.33.
At the American Stock Exchange, the market value index advanced 1.06 to 375.10.
The market opened weak after Monday’s rally, then stalled around midday after the Dow pierced the psychological resistance level of 2,700.
The blue-chip indicator had not closed higher since the day before the Oct. 13 stock plunge, when it reached 2,759.84.
The market regained its footing in mid-afternoon behind a strengthening bond market but wasn’t able to sustain a strong rally as volume faded.
“It was a sleepy, slow day, not the kind of market that gives people inspiration,” said John Burnett, senior vice president at the investment firm Donaldson, Lufkin & Jenrette.
Analysts said recent actions by the Federal Reserve confused investors and sent many scurrying to the sidelines to await fresh signals as to its intentions.
Despite the confusion, analysts said, investors remained generally optimistic that interest rates are in an overall declining pattern.
“Over the next couple months the perception is that rates have to come down, so there’s no reason to get excited about short-term action by the Fed,” said Dennis Jarrett, technical analyst with Kidder, Peabody & Co.
Oil stocks led the blue-chips on the upside, and technology stocks remained generally weak, equities traders said.
Bond prices were narrowly mixed in early trading today as activity slowed after Federal Reserve moves Monday that indicated no relaxation in credit policy.
The Treasury’s benchmark 30-year bond was down 1/32 point, or under $1 per $1,000 face amount, around midday. Its yield held at 7.90%.
“Everybody’s kind of licking their wounds,” said Kathleen Camilli, a money market economist at Drexel Burnham Lambert Inc. “The market got kind of whipsawed in the last week.”
The Fed drained money from the banking system Monday, driving the key federal funds rate up to 8 1/2% by the end of the day from 8 1/4% late Friday.
The federal funds, the interest on overnight loans between banks, is a key indicator of rate trends. Last week, many traders had believed that the Fed signaled a lower target rate for federal funds by draining reserves, but that belief was quashed Monday.
The rate was quoted at 8 5/8% by midday today, up from 8 1/2% late Monday.
Economists said the Fed added reserves to the banking system today because of seasonal needs for more money, but the move was seen as necessary and not a sign of a looser credit policy.
