STOCKS : Dow Up 24.01 on Hopes for More Rate Cuts

Wall Street stocks rose sharply in heavy trading Thursday, as investors set aside jitters about the Gulf War and bought on hopes that interest rates will drop again.

Industrial, technology and airline stocks led the rally, and the smallest issues in those groups performed best.

“The bull is coming out of the closet it’s been hiding in. But there are just enough negatives to keep people on the nervous side,” said Don Hays, investment strategist at Wheat First Securities.

The Dow Jones average of 30 industrials rose 24.01 points, or 0.9%, to 2,643.07. The Dow had gained 15.84 points on Wednesday.

Once again, smaller over-the-counter stocks jumped much more sharply than the Dow. The NASDAQ OTC composite index leaped 7.42 points, or 1.9%, to 391.33.

On the New York Stock Exchange, advancing issues outnumbered declines by more than 3 to 1 in nationwide trading, with 1,231 up, 398 down and 379 unchanged.

Big Board volume expanded to 223.15 million shares from Wednesday’s 169.44 million.

Alfred Goldman, technical research director at A. G. Edwards & Sons, said institutional investors were putting their cash to work after steady losses during the past few months.

“Professional money managers are looking beyond Iraq and 1991, saying that the business cycle is going to improve in 1992,” he said.

“When the market starts moving like this, people don’t want to get left behind,” added analyst Brett Discher at Dain Bosworth.

With the war in its second week, traders have begun to focus back on the economy. The greatest hope for the economy--and for stocks--is an expected decline in interest rates, beyond the already significant drop of recent months.

The Federal Reserve has given strong signals that it will push rates lower to help the economy. Thus, more investors are betting that an economic rebound isn’t too far off, so they are actively chasing many cyclical companies whose fortunes should improve with the economy.

Among the market highlights:

* Industrial stocks leading the market higher included Caterpillar, up 2 3/8 to 46 1/4; Dow Chemical, up 2 1/8 to 49; International Paper, up 2 1/4 to 57 7/8; GE, up 1 1/4 to 58 1/2, and Ethyl, up 1 3/8 to 26 1/8.

* Technology stocks, whose fortunes also are tied to economic cycles, also were strong. Data General rocketed 4 to 8 1/4 after surprising Wall Street with healthy earnings. Among other tech stocks, IBM added 1 3/4 to 121, Digital Equipment rose 1 5/8 to 67 1/2, Compaq was up 2 1/4 to 61 1/2 and Stratus gained 1 3/4 to 25. (Market Beat column, D3.)

Among smaller Southland tech issues, Tekelec jumped 1 3/4 to 15 3/4, Datron Systems gained 3/4 to 9 and Advanced Logic rose 1 1/2 to 14 1/2.

* Airline stock winners included AMR, up 1 1/2 to 52 5/8; Southwest, up 1 5/8 to 22 5/8; USAir, up 1 1/2 to 20 3/4, and UAL, up 5 1/4 to 128 3/4.

Railroads also surged. Conrail jumped 4 3/8 to 44 1/2 on a surprising earnings report. Burlington Northern rose 1 1/8 to 28 3/4 and Norfolk Southern added 1 5/8 to 43 1/8.

* Investors continued to bid up health-care stocks, especially biotech issues. Amgen jumped 1 1/2 to 72 1/4, Centocor rose 2 to 51 3/4 and Biogen added 1 1/2 to 31 1/4. Other major health-care movers included National Medical Enterprises, up 1 1/2 to 40 7/8, and Warner Lambert, up 2 5/8 to 72 1/2.

* Among smaller Southland stocks leading the OTC market higher were Pinkerton’s, up 2 1/2 to 26 1/2; K Swiss, up 1 3/4 to 16; Cimco, up 1 1/4 to 10 1/2, and Birtcher Medical, up 3/4 to 8.

* Blockbuster Entertainment plunged 2 1/4 to 25 5/8 on profit taking after reporting fourth-quarter earnings that were in line with expectations. Another big loser was apparel maker Quicksilver, off 3 3/8 to 8 1/8 after saying it expects to report lower first-quarter net income and sales.

* Bankers Trust tumbled 4 3/8 to 41. The company posted higher fourth-quarter profit but said its 1991 results would probably show the effects of recession.

Credit

Higher unemployment figures and an optimistic report by American generals on the war against Iraq helped send bond prices slightly higher.

The Treasury’s bellwether 30-year bond rose 7/16 point, or $4.38 per $1,000 in face amount. Its yield dropped to 8.16% from 8.20% late Wednesday.

The Labor Department reported that claims for state unemployment insurance jumped 67,000 in the week ended Jan. 12 to 463,000. Bond traders interpreted that as further evidence of economic weakness.

The report reinforced speculation that the Federal Reserve would ease interest rates to stimulate economic growth.

Many traders also expect a short war against Iraq, and thus see less chance of major damage to oil fields in the Middle East. If oil prices stabilize, so will inflation, which would be good for bonds.

The rate for federal funds, the interest on overnight loans between banks, was 8% late Thursday, far above its perceived target of 6.75%, but the figure was attributed to technical influences in the market and not to any change in Fed policy.

Currency

The dollar held its ground against foreign currencies in light trading amid a lack of significant war and economic developments.

“There’s not a lot of speculative flow out there until people see real news on the war,” said Mike Casey, economist for Maria Ramirez Capital Consultants Inc. “The change on the day is just about like someone’s trading margin.”

But Casey and other analysts said the dollar seems poised to lose ground as the war drags on and its potentially negative effect on the U.S. economy becomes apparent.

The dollar was up fractionally against the German mark in New York, closing at 1.486 marks, compared to Wednesday’s 1.482. The dollar also rose slightly against the Japanese yen, buying 132.35 yen, compared to late Wednesday’s 131.72.

Commodities

Silver sank to its lowest price in more than 16 years as slackening demand and burdensome supplies continued to dampen industrial and investment demand for the metal.

Gold prices also fell Thursday. On other commodity markets, pork futures soared, cattle were higher, soybean futures plunged and most grain futures advanced.

Silver futures settled 14.7 to 16.6 cents lower on New York’s Commodity Exchange, with the spot price, represented by the contract for January delivery, at $3.76 an ounce. It was the lowest daily close since September, 1974, when spot silver traded as low as $3.73, the exchange said.

Spot silver traded down to $3.75 on Thursday but recovered slightly by the close.

Gold futures ended $5.40 lower across the board on the Commodity Exchange, with the February contract at $373.50 an ounce. Platinum settled $12.40 lower across the board on the New York Merc, with January at $382.40 an ounce.

Analysts said there were many reasons for silver’s slide but perhaps the greatest was the recession, which has reduced industrial demand for the metal at a time of abundant supplies. Silver is used heavily in the photographic, electronics and jewelry industries.

The Commodity Exchange said more than 266 million ounces of silver were stored in exchange-approved warehouses as of Thursday morning, a near record.

Market Roundup, D6