STOCKS : Dow Rises 16 as Interest Rates Heat Up Market
Wall Street stocks closed higher Tuesday, with the broad market especially strong, as lower interest rates again fired up demand for stocks.
The Dow Jones average of 30 industrial stocks rose 16.09 points to 2,788.37.
In the broader market, advancing issues outnumbered declining ones by more than 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks.
Big Board volume came to a strong 290.57 million shares, up from 250.75 million Monday.
GM was the second-most-active issue Tuesday on the NYSE, falling 1/4 to 35 as more than 5.1 million shares changed hands. The nation’s biggest car maker reported on Tuesday that its late-January U.S. car sales fell 30.4% from 1990.
Some financial service stocks continued to advance on optimism that the interest rate cuts will boost trading, which would be good for business.
Among the market highlights:
* American Express rose 1 3/4 to 24 7/8; Morgan Stanley added 3 1/8 to 65 1/2; Salomon Inc. added 3/4 to 24 1/2; Merrill Lynch gained 3/4 to 25 1/4, and Federal National Mortgage climbed 7/8 to 43 3/4.
* Shares in Polaroid Corp. rose after the company announced better-than-expected results for the fourth quarter. Polaroid was up 1 5/8 to 27 3/4. “Sales were good--up a total of 10.8%--and they did a good job of controlling the costs, which they promised they would do,” said analyst Brenda Lee Landry of Morgan Stanley.
* Amgen jumped 3 1/2 to 83, leading a biotechnology stock rally. Genetics Institute rose 3 1/2 to 52 1/4, Genzyme Corp. added 1 1/8 to 33 3/8 and Centocor rose 1 1/2 to 60 1/4.
* American Home Products rose 2 1/2 to 54 3/8. Smith Barney upgraded its rating on the company to a “trading buy” from hold, based on expectations of a turnaround at the company.
* The stock of Pepsico added 1 3/4 to 28 3/4 after it reported better-than-expected fourth-quarter results. Its earnings rose 36% from a year ago.
* Schlumberger’s fourth-quarter profit was slightly below analysts’ estimates. It fell 2 5/8 to 56 1/4.
In foreign trading, stocks closed higher in heavy trading as investors turned bullish on Wall Street’s gains. The key 225-share Nikkei average closed up 534.21 points or 2.29% to 23,821.57.
Shares finished sharply higher on London’s Stock Exchange Tuesday in a late afternoon rally. The Financial Times 100-share index was up 29.6 points, or 1.4%, at 2,202.0 at the close.
German shares finished mixed after opening sharply higher. The 30-share DAX index posted its fifth straight gain, rising 3.82 points to 1,438.85.
Credit
Bond prices strengthened on strong demand for new Treasury debt and relentlessly weak economic news.
Anticipation that the recession will deepen and last longer than first thought convinced many investors to buy government bonds, historically considered the safest way to park money during economic declines.
The Treasury’s key 30-year bond, a sensitive barometer of the economy and interest-rate trends, fell to 8.03% from 8.04%, the lowest level since it dipped to 7.99% on Jan. 2, 1990. The bond’s price, which rises when the yield falls, rose 1/4 point or $2.50 per $1,000 face amount.
The federal funds rate, the interest on overnight loans between banks, vacillated throughout the day and was quoted late Tuesday at 2%, down from 6.50% late Monday.
Currency
The dollar declined moderately against major foreign currencies, but a second day of actions by the Federal Reserve protected the U.S. currency against a steeper fall, traders said.
In an effort to soften the dollar’s slide, the Fed entered foreign exchange markets three times Tuesday to buy dollars against the German mark, traders said. If not for the Fed’s Fed intervention, the dollar may have slipped even lower than the historic low of 1.4560 German marks reached Monday in New York, they said.
By day’s end in New York, the currency closed at 1.4577 marks, below late Monday’s 1.4635 marks.
In New York, the dollar closed at 129.48 Japanese yen, down from late Monday’s 130.64 yen. The British pound strengthened to $1.9920 from late Monday’s $1.9810.
Commodities
Platinum futures prices fell sharply on the New York Mercantile Exchange, pressured by weakening industrial demand for the metal. Gold and silver futures also retreated.
On other commodity markets, energy futures were mixed; pork futures plunged; cattle were mixed, and grains and soybeans were mixed.
Platinum contracts settled $7.30 lower across the board. April deliveries finished at $379.70 after touching $379.50, a life-of-contract low, during the session.
On New York’s Commodity Exchange, gold futures finished $2.20 to $3 lower, with February at $366.40 an ounce; silver was unchanged to 0.5 cent lower, with February at $3.839 an ounce.
Light, sweet crude oil futures finished 21 to 48 cents lower, with March at $20.66 a barrel.
Market Roundup, D6
