Dow Gains 24.25 Points as Market Resumes Its Rally
Stocks closed higher today, as hopes mounted that interest rates are headed lower and oil prices fell on the belief war is not imminent in the Persian Gulf.
The Dow Jones industrial average rose 24.25 points, or nearly 1%, to end at 2,559.65. In the broader market, advancers outstripped decliners by a 2-1 margin on New York Stock Exchange volume of 179.31 million shares.
Investors took heart on a drop of almost $2 in oil prices and increasing speculation the Federal Reserve will soon push interest rates lower to stimulate economic growth.
“Everyone still hopes we get the Fed to ease (interest) rates soon,” said Ron Doran, director of institutional trading at C.L. King and Associates. “A lot of the rally has been due to that.”
Doran noted that the price of oil--which has swung between $21 and $41 since Iraq invaded Kuwait--is still a key factor for Wall Street.
Lower energy prices would ease fears of inflation, and analysts said government data released today confirmed a slowdown was under way, giving the Federal Reserve Board room to lower rates.
“All these October figures confirm that the economy fell off a cliff as the fourth quarter began,” said Prudential-Bache market analyst Larry Wachtel.
“This market is a roaring ‘buy’ over the short term,” one trader said. He said the Dow could move up another 100 or 150 points before the rally ends.
On Tuesday, the 30-share index dipped nearly 5 points after rallying almost 100 points in the previous three sessions.
“The market’s acting about as well as one could possibly want,” said Alan Newman, a technical analyst at H.D. Brouse and Co. Inc. But he said investors may take some profits if stocks continue to move higher.
Among actively traded blue chips, International Business Machines rose 2 to 114 with an hour of trading to go; General Motors 1 to 40; Philip Morris 5/8 to 49 1/8, and Pepsico 1/2 to 25 3/4.
Bank stocks continued their recent rally from depressed levels. BankAmerica gained 7/8 to 24 1/8; Citicorp 1 to 14 3/8, and Chase Manhattan 1/4 to 11 1/4.
Bond prices were virtually unchanged in light trading early today as the market waited for indications that the Fed has moved to lower interest rates.
The government’s key 30-year bond was unchanged in price from late Tuesday, with the yield holding steady at 8.53%.
Analysts said bond activity was light, with traders already positioned for a possible move by the Fed.
“Every day people are looking for a Fed ease, and every day it doesn’t happen from here on out I think the market will be disappointed,” one analyst said.
He said some indication may come Friday, when the government is due to release the consumer price index for October and merchandise trade for September.
Some expect the Fed to pave the way for a quarter percentage point drop in the federal funds rate, the rate banks charge each other on overnight loans. But at midday, the rate was 8 1/2%, up from 7 3/4% Tuesday. It often fluctuates beyond its usual barriers on Wednesdays for technical reasons involving the supply of loan funds.
