STOCKS : Dow Rises 7.55, Aided by Dip in Interest Rates
Fresh declines in interest rates and a late buying surge helped the stock market extend its spring rally Tuesday, propelling the Dow Jones industrial index to its fifth record high in the past seven trading sessions.
The Dow Jones index of 30 industrials, which climbed 24.77 points to an all-time high Monday, gained 7.55 points to set another record--2,852.23.
Chances of another advance were in doubt at midday as profit taking eroded a strong early rally, but buyers appeared in the last 30 minutes to give the market a lift.
Advancing issues outnumbered losers by 8 to 7 in nationwide trading of New York Stock Exchange-listed stocks, with 816 up, 689 down and 501 unchanged.
Big Board volume surged to 203.35 million shares from Monday’s 166.28 million.
The market got an early lift from declining interest rates and a strong performance on stock markets in Tokyo and London.
After the market opened, the Dow Jones industrials surged nearly 26 points in the first half hour before stalling.
By noon, the average was slightly below Monday’s close, and it drifted in negative territory most of the afternoon.
“There was probably a little too much exuberance at the beginning,” said Newton Zinder, a market analyst for Shearson Lehman Hutton.
Bill Raftery, vice president for technical research at Smith Barney & Co., added at midday, “This is perfectly normal profit taking.”
The stock market has rolled up impressive gains the past three weeks in a rally attributed mainly to declines in interest rates.
Declining rates help stocks by making the potential rewards on them more appealing than yields on fixed-income investments. Lower rates also can improve the profit outlook for some companies by cutting their borrowing costs.
Nonetheless, some market watchers expect a correction in the stock market that will drive prices lower.
Even small declines in stock prices appeared to draw out buying interest in the last 30 minutes of the session, lifting the market higher.
“It shows that even modest price discounts are being met by anxious buyers who have missed this three-week old rally--and short sellers,” said Alfred E. Goldman, director of technical market analysis at A. G. Edwards & Sons Inc. in St. Louis.
Short-sellers are traders who establish positions based on the presumption that prices will fall; they are drawn into the market as buyers when it becomes clear that they have bet wrong and have to settle their accounts.
The most actively traded issue on the NYSE was Nova Corp. of Alberta, Canada, which fell 3/8 to 7 following a 1/2-point gain in active dealing Monday. The company said Monday it was selling its rubber division.
Computer Associates International fell 3/8 to 15 1/2 after reporting earnings results that disappointed some analysts.
Among widely held stocks, Philip Morris rose 1/2 to 45, American Telephone & Telegraph lost 1/4 to 43 1/8 and International Business Machines was up 3/4 to 117 3/4.
Federal Express tumbled 5 1/8 to 47 amid apparent disappointment over April volume figures released late Monday.
In Tokyo, stocks closed up as a stronger yen helped the market regain ground lost in the morning. But analysts were still worried about the near-term trend. The 225-share Nikkei average rose 173.25 points to 31,938.30.
Strong buying interest propelled shares sharply higher in active trading on London’s stock exchange. The Financial Times 100-share index closed up 29.2 points at 2,311.3.
CREDIT Foreign Purchases Boost Bond Prices Bond prices snapped a three-day lull, strengthened by foreign buying and a news report that suggested the yawning federal deficit might not be so intractable.
The 30-year Treasury bond, a closely followed barometer of the market’s mood, rose more than $8 per $1,000 in face amount, its first big advance since last Wednesday. The bond’s yield, which falls when prices rise, dropped to 8.60% from 8.68% the previous session.
Bond strategists attributed the market’s rise partly to evidence of significant purchases of intermediate-maturity Treasuries by foreigners. Some reckoned that the buyers were oil-producing Persian Gulf countries looking for safe ways to put pools of cash to work.
Others said the market rallied on a report in the Chicago Tribune that several federal agencies had amassed $50 billion in unspent appropriations, which presumably could be used to narrow the federal deficit.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.188%, unchanged from late Monday.
CURRENCY Dollar Goes Higher; Mark Still Reeling The dollar gained ground against most other currencies, particularly the West German mark, which remained under pressure as a result of growing political discord over plans to reunite with East Germany.
Currency dealers said the dollar benefited from continued weakness in the mark related to concern about the future of the reunification plan.
The dollar rose in Europe to 1.6685 West German marks from 1.6630 Monday and to 1.67315 marks in New York from 1.66245.
COMMODITIES Cocoa Futures Hit a 14-Month High Cocoa futures prices seesawed to a 14-month high on New York’s Coffee, Sugar and Cocoa Exchange amid mounting fears of supply disruptions from the Ivory Coast, the world’s largest producer.
On other commodity markets, precious metal futures rose; copper advanced; grains and soybeans were mostly lower; energy futures were mixed, and livestock and meat futures were mixed.
Cocoa futures settled $39 to $45 higher, with the contract for delivery in July at $1,491 a ton.
