Buying Spree Gives Dow 42-Point Push to Six-Month High
Anticipating further cuts in interest rates, investors sent stock prices soaring Wednesday in what market experts termed a “buying stampede.”
The Dow Jones industrial average jumped 42.57 points to 2,830.94 on heavy volume. That is the highest level for the Dow since 2,864.60 last Aug. 2--the day Iraq invaded Kuwait.
Some 276.9 million shares changed hands on the New York Stock Exchange on Wednesday compared with 290.57 million shares Tuesday. Gainers overwhelmed losers, 1,195 to 451.
“It is absolute buying panic--a buying stampede,” said Jon Groveman, president of Ladenburg, Thalmann & Co. in New York. “Everybody wants in (the stock market) at the same time.”
Meanwhile, bond yields edged lower, gold prices plunged and the dollar hit new lows against major currencies for the second time this week. The highlights:
* The price of the Treasury’s bellwether 30-year bond climbed $2.50 for each $1,000 in face amount, which drove the bond’s yield down to 8% from 8.02% Tuesday. Yields on 10-year Treasury notes auctioned Wednesday fell to their lowest levels in five years, averaging 7.85%.
* The dollar fell to a record low against the German mark and to a 10-year low against the British pound as traders dumped dollars, expecting U.S. interest rates to slide further.
* Gold lost $3.50 an ounce in New York to $362.90.
Market experts said Wednesday’s activity was spurred by a widespread belief that the Federal Reserve is on the verge of making further cuts in U.S. interest rates.
“There is a general perception that interest rates are still going down,” said Ken Ackbarali, economist at First Interstate Bancorp in Los Angeles. “The market likes lower rates.”
Still, some believe the current market rally can’t last much longer, and note that stocks have nearly gone straight up since mid-January.
“We are in an area where the market is vulnerable” to a big drop, said Groveman. “But, at the same time, when you are dealing with this kind of runaway freight train, no one knows exactly when it is going to stop.”
Among the market highlights:
* Oil stocks rocketed, helped partly by a bill introduced by Sen. Bennett Johnson (D-La.) to re-energize the domestic oil industry. But many analysts also said the oil stocks were simply ripe for a rally, after lagging the market’s advance since October. Brokerage C. J. Lawrence Inc. recommended the stocks, saying they have become extremely cheap relative to earnings.
Arco soared 2 3/4 to 126 1/4, Chevron jumped 3 3/8 to 72 5/8, Unocal gained 2 3/8 to 27 1/8, Exxon rose 2 1/4 to 52 7/8 and Oryx leaped 3 1/4 to 37 1/4. Among oil-services firms, Halliburton rose 3 1/4 to 48, Baker Hughes gained 2 to 26 1/2 and Schlumberger added 3 to 59 1/4.
* Monsanto jumped 4 to 57 after projecting improved earnings this year. Other industrial stock gainers included ITT, up 1 3/4 to 55, Nucor, up 1 3/8 to 73, Emerson Electric, up 1 5/8 to 44 7/8 and International Paper, up 2 1/2 to 40 7/8. But Kodak plunged 2 1/4 to 44 after reporting disappointing earnings.
* McDonnell Douglas soared 5 3/8 to 45 1/2 and General Dynamics gained 1 1/2 to 28 after the government deferred demands for repayment of cost overruns.
* Amgen, the Thousand Oaks-based biotechnology firm, was flat at 83 in extremely heavy trading. Abbott Labs sold a 2.5-million-share stake that it had owned. Biotechnology stocks in general continued their strong rally. Immunex shot up 4 3/4 to 43 1/4, Genzyme rose 2 to 35 3/8 and Centocor leaped 3 1/2 to 63 3/4.
* Technology stocks, especially in the software area, renewed their advance on strong presentations made at a Goldman Sachs technology stock conference in New York. Cadence was up 2 5/8 to 29 5/8, Sun Microsystems gained 1 3/8 to 31, Autodesk added 3 3/8 to 46 1/2 and Microsoft rose 4 1/2 to 105 3/4.
* Telephone stocks rebounded from their recent slide. Pacific Telesis was up 1 1/8 to 42 3/8, Nynex added 1 5/8 to 73 3/4 and Southwestern Bell rose 1 1/2 to 54 5/8.
* The NASDAQ over-the-counter composite stock index continued to best the Dow’s performance, with a 1.6% gain to the Dow’s 1.5% rise. The OTC index rose 7.04 points to 439.24. Among Southland OTC issues, retailer Wet Seal rose 1 1/2 to 11 3/4, American Ecology rose 1 to 9 3/4, Birtcher Medical added 1 1/4 to 10 3/4, IDB Communications was up 1/2 to 9 and Syncor International gained 1 to 12 7/8.
In foreign trading, stocks were relatively limp, as investors continued to show much more caution overseas than in the United States. In London, the FTSE-100 index dropped 7.2 points to 2,194.8. In Frankfurt, the DAX index lost 10.16 points to 1,428.69.
In Tokyo, prices edged up as the Nikkei 225-share index rose 130.47 points to 23,952.04. Early today, the Nikkei was up 112.36 points to 24,064.40.
Market Roundup, D8
