STOCKS : Interest Rate Hopes Propel Dow Up 11.26
The stock market forged ahead Monday in its sixth straight gain as optimism spread on Wall Street that interest rates have peaked.
The Dow Jones index of 30 industrials, up 65.31 points last week, rose another 11.26 to 2,721.62.
Advancing issues outnumbered declining issues in nationwide trading of New York Stock Exchange-listed stocks, with 943 up, 571 down and 493 unchanged. Big Board volume slipped to 132.76 million shares from Friday’s 140.55 million.
Traders said the market’s upward move was tempered by concern about the Treasury Department’s auction this week of $30 billion in notes and bonds.
But overall, traders were upbeat.
“I think this is a very promising picture in view of the fact that the market has been able to sustain this move up longer than we would normally expect,” said Gene Jay Seagle, director of technical research at Gruntal & Co.
Monday’s rise followed a 14.19-point gain in the Dow on Friday, when a surprisingly weak U.S. employment report sent bonds surging and fixed-income interest rates down sharply.
“With the most recent number on employment, people are reading that perhaps the economy is a bit softer and that we’re not going to see inflationary pressures,” said Ronald Schroeder, chief investment officer at J&W; Seligman.
Traders had expected increasing inflation to send interest rates higher, but the weak signs of economic growth evident in Friday’s April employment report put those ideas to rest.
“We’ve gone from an environment where rates were slightly negative to where rates are now neutral for the market,” said Dean Witter chief technical analyst Philip Roth.
Some financial and utility issues continued to benefit from more optimistic views of the interest rate outlook. Dow Jones index of 15 utilities rose 2.13 to 210.51, for a 1% advance, more than double the industrials’ percentage gain.
Among banks, Security Pacific rose 7/8 to 38 1/4 and Wells Fargo added 1 1/8 to 70 5/8.
High-tech stocks led the rally. Microsoft jumped 2 1/4 to 64, Conner Peripherals rose 1 5/8 to 21 3/4 and Motorola gained 1 7/8 to 72 1/2.
Some retailers were strong, including May, up 1 to 51 1/2, and Dayton Hudson, up 7/8 to 69 1/2.
Greyhound Dial fell 1 3/4 to 28 3/4 on worries about its stake in Greyhound Lines, which continues to be hampered by a violent strike.
Wall Street also got support from a strong gain in Tokyo stock prices, which rose 2.59% on Monday after a four-day weekend. The key Nikkei 225-share index closed up 782.63 points at 30,956.27.
The London Stock Exchange was closed for a national holiday. In Frankfurt, the DAX index rose 22.06 to 1934.95.
CREDIT Bond Prices Ease in Quiet Trading Bond prices slipped in light dealings as some traders sold bonds to take advantage of last week’s late price run-up while others stood aside in advance of the government’s refunding auctions.
The auctions get under way today with the sale of $10.5 billion in three-year notes and continue on Wednesday and Thursday with the sale of $10 billion each in 10-year notes and 30-year bonds.
The Treasury’s benchmark 30-year bond lost 3/16 point, or about $2 per $1,000 face amount, while its yield, which rises when prices fall, rose to 8.84% from 8.81% Friday.
Market watchers said traders sold bonds to profit from Friday’s big run-up in prices, which was caused by the release of employment numbers that suggested the economy was weaker than thought.
The federal funds rate, the rate banks charge each other on overnight loans, was quoted at 8.188%, unchanged from late Friday.
CURRENCY Dollar at 2-Year Low Against Mark The dollar fell to its lowest point in more than two years against the West German mark and lost ground to other major currencies.
The U.S. currency ignored the weekend meeting of the powerful Group of Seven industrial countries, and traders focused instead on last week’s U.S. jobs report for April. The surprisingly weak report relieves pressure on the Federal Reserve to pump up interest rates, some economists said.
The dollar closed at 1.655 marks, its lowest level since April 4, 1988, and down from 1.666 Friday. Against the Japanese yen, the dollar fell to 158.10 yen from 158.30.
COMMODITIES Grain Futures Rise on Export Outlook Grain and soybean futures prices closed higher on the Chicago Board of Trade as expectation of additional export sales fueled buying interest.
On other markets, energy futures were higher, precious metals prices rose, copper futures retreated, and livestock and pork futures advanced.
Wheat settled 3 to 5.75 cents higher, with the contract for delivery in May at $3.83 a bushel; corn was 1.50 to 3.50 cents higher, with May at $2.9075 a bushel; soybeans were 8.50 to 11 cents higher, with May at $6.37 a bushel.
