FINANCIAL MARKETS : STOCKS : Rally Resumes; Dow Jumps 12 to Record High
Stock prices resumed their upward march Thursday to close at a record high after a mild setback Wednesday, overcoming persistent weakness in the bond market.
Traders said stocks were bolstered ahead of today’s expiration of key stock options, which could free up new buying power.
The Dow Jones index of 30 industrials, off 2.77 on Wednesday, rose 12.03 points to 2,831.71.
Gainers beat losers in nationwide trading of New York Stock Exchange-listed stocks, with 832 up, 649 down and 505 unchanged. Big Board volume totaled 164.77 million shares, against Wednesday’s 159.81 million.
The market’s advance was tempered by weak bond prices for the third straight day. Bonds slipped on the belief that the Federal Reserve plans no imminent lowering of interest rates.
Most of stocks’ gains came early in the day, encouraged by a brief drop in open-market interest rates.
The Dow traded in about a 26-point range, after brushing aside news that the U.S. trade deficit widened to $8.45 billion in March from a revised $6.1 billion gap in February. The report said exports reached record levels but that imports also soared.
Traders said investors continued to hunt for bargains among stocks expected to show strong earnings growth in the years ahead.
Some big gainers among Southland stocks included Western Waste, up 1 7/8 to 37 1/2; Unitrin, up 1 3/4 to 32 3/4; Price Club, up 1 7/8 to 37 1/2; and Software Toolworks, up 1 7/8 to 17 7/8.
Gap Inc. fell 2 1/2 to 66 1/2, amid some evident disappointment with earnings for the company’s fiscal quarter ended May 5: 60 cents a share, against 43 cents a year earlier.
In Tokyo, stocks closed firmer, helped by a strong yen. But an absence of new market factors drove more and more players to the sidelines. The Nikkei 225-share index added 93.98 points to close at 32,061.60.
Stocks closed mixed in Frankfurt, West Germany, after a volatile session. The 30-share DAX index closed 0.19 point lower at 1,841.58.
CREDIT Bond Prices Fall Over Credit Policy Bond prices fell moderately after indications that the Federal Reserve was not easing credit policy.
The bellwether 30-year bond slipped 3/16 or about $1.87 per $1,000 face amount, after losing around $1.50 on Wednesday.
Its yield, which moves inversely to the price, edged up to 8.64% from 8.63% late Wednesday.
Prices had moved higher in early trading after the Commerce Department released the trade deficit report for March.
The deficit was larger than expected, but analysts said the market shrugged off the report.
Elizabeth Reiners, a vice president for money market research at Dean Witter Reynolds Inc., said traders were looking for signs from the Fed that it would ease credit, thereby allowing interest rates to fall and bond prices to rise.
However, the hoped-for signals never materialized, and investors decided to take some profits, she said.
Trading was thin and exaggerated price movements, Reiners said.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.188%, up from 7.50% late Wednesday. The jump was due to technical factors.
CURRENCY Dollar Shrugs Off Trade Deficit Report The dollar ended firmer against all key currencies except the British pound and Canadian dollar, even though the government reported that the U.S. trade deficit widened sharply in March.
Dealers and analysts said the currency market generally shrugged off the trade report. “The trade number wasn’t that far out of expectations to be a big enough deal,” said Craig Sloane, a currency analyst with Smith Barney, Harris, Upham & Co. “We’re not talking about anything that shocking.”
Sloane said technical factors helped push up the dollar.
COMMODITIES Platinum Rises on S. African Violence Platinum futures prices rose sharply amid reports of increased racial violence in South Africa, the world’s largest platinum-producing country.
On other commodity markets, gold and silver futures also advanced; copper futures were mixed; pork futures rose to the daily limit for the second straight day; soybeans rebounded from recent losses, and energy futures were mixed.
Platinum futures settled $5.30 to $5.40 higher on the New York Mercantile Exchange, with the contract for delivery in July at $492.90 an ounce.
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