Dow Jumps 41.58; Close Is Highest Since Iraq Invaded

Stock prices soared to their highest close in six months today as prices rallied on growing hopes that a downturn in interest rates will pull the economy out of recession.

The Dow Jones average of 30 industrials rose 41.58 points, or 1.52%, to close at 2,772.27, the highest Dow close since Aug. 3, 1990, the day after Iraqi troops overran Kuwait.

Volume was a heavy 250.75 million shares on the New York Stock Exchange, where nearly four stocks advanced for every one that fell.

Banks and financial companies were among the most active issues as investors bet that last Friday’s easing of credit by the Federal Reserve would help boost the ailing sector. Investors were also afraid to miss out on a rally.

“Nobody wants to be left on the platform as the train takes off,” said Susan Del Signore, a trader at Travelers Investment Mangement.

The Fed aggressively cut its benchmark discount lending rate by a half-point to 6% Friday, after the government reported extremely weak employment data for January.

The report fueled fears that the recession was deeper than thought, leaving the Dow off 5.70 points Friday.

Banks gained on hopes that lower interest rates would fuel lending and profits. Many big banks cut their prime lending rates to the best business customers Friday and today.

Paul Kronlokken, a technical analyst at Piper Jaffray & Hopwood, said selling pressure was nominal because investors had already pared back their portfolios in the months leading up to the Persian Gulf War.

“Most selling occurred prior to the war. Everyone had plenty of time to get rid of stocks,” he said.

Speaking of the widespread buying mood, Kronlokken said, “I think it’s a snowballing effect. People are buying into the rally.”