Consumer Confidence Surges on Gulf War Success : Conference Board Report Gives Market a Reason to Rally; Dow Advances 49.01
U.S. investors took home nearly $57 billion in paper profits on Tuesday as a record boost in consumer confidence sent stock prices soaring.
The Dow Jones industrial average, a measure of blue chip stock values, rose 49.01 to 2,914.85--a 1.7% gain. Broader market indexes rose as well, with the average share on the New York Stock Exchange climbing 54 cents.
Volume on the New York Stock Exchange was strong, with about 198.7 million shares trading hands, compared to 153.9 million on Monday. Advancing issues outnumbered losers by a 2-to-1 margin.
The biggest factor buoying stock prices was the Conference Board’s March consumer confidence survey. The board’s confidence index rose to 81.0 in March from 59.4 in February, which was the biggest month-to-month hike since the group started tallying consumer confidence statistics in 1969.
This survey is considered a leading economic indicator, said Hugh Johnson, chief investment officer at First Albany Corp.
“It does not tell us where we are, but it tells us where we are going,” he added. “Today it made us think we are closer to the end of the recession than we thought.”
However, some other factors came into play as well, market experts said.
The nation’s money supply is showing subtle, positive changes, said Christine Lisec-Pinto, an analyst at Merrill Lynch in New York. That means a broad list of stocks could continue to gain as more money becomes available to spend and invest, she said.
And other analysts noted that institutional investors have started buying stocks simply because the end of the first quarter is near. At the end of each quarter, institutional investors must reveal which stocks they own. Those who are under-invested in times of rising stock prices fear ridicule and rejection, so they buy shares frantically in the days before the quarter’s end just for “window dressing.”
Despite Tuesday’s gains, several experts remain pessimistic about the market’s future.
Dividend yields are in the 3.4% range, noted Geraldine Weiss, editor of Investment Quality Trends in La Jolla. That’s a level that should “suggest caution to investors looking for value,” she said.
Johnson added that banks still seem to be reluctant to lend, and that is a bad sign for the economy and for stock prices.
“If banks are not lending, it is very difficult to make the case that the economy is going to recover,” he said. “Banks have to lend to provide the sustenance for the economy to grow.”
Among the highlights:
* Technology stocks led the market as hopes for renewed economic growth resurfaced. Apple Computer rocketed 5 1/2 to 70, Commodore was up 2 1/4 to 18, Intel gained 2 7/8 to 47 and Microsoft leaped 6 7/8 to 105 1/8.
Many smaller tech stocks also saw heavy new interest. Among Southland companies, Micropolis gained 1/2 to 12 1/2, Odetics class A added 3/8 to 7 3/4, Tokos Medical rose 1 1/4 to 20 1/2, Advanced Logic was up 1 1/2 to 17 1/4 and Tekelec jumped 1 3/4 to 24 1/4.
* Dow index stocks that were up strongly included GE, up 3 1/4 to 70 1/8; Merck, up 3 3/4 to 108 1/8, and American Express, up 1 3/4 to 30. Also, Sears jumped 1 7/8 to 36 1/4 after rising 1 3/4 on Monday. The troubled retailer sees a gain in first-quarter earnings because of healthy results from its insurance and brokerage units.
* Oil services stocks were broadly lower after Halliburton projected lower first-quarter results, partly because of heavy expenses incurred in gearing-up for new business in the Mideast. Halliburton dropped 3 to 46. Schlumberger also fell, down 3/4 to 59 1/2.
* Health-care stocks, which have led the bull market rally this year, jumped again. Merrill Lynch recommended health-maintenance organization stocks, sending Southland firms FHP and PacifiCare higher. FHP soared 3 to 26 and PacifiCare rose 7/8 to 26 3/8.
Another Southland health-care firm, Syncor, jumped 1 5/8 to 16 1/8. The company, which distributes radiopharmaceuticals, reported healthy quarterly earnings on Monday.
The New York Stock Exchange composite index closed up 3.16 to 205.55. The NASDAQ over-the-counter index rose 10.08 points to 478.57, a 2.2% jump that was the biggest of any major market index.
Meanwhile, the Wilshire Associates equity index, which measures the market value of all listed common stocks, rose $56.97 billion to $3.58 trillion.
Stock prices were mixed in foreign markets. Tokyo’s Nikkei average closed down 306.41 to 26,339.38, while share prices climbed modestly in London. London’s Financial Times-Stock Exchange index rose 5.2 to 2,437.1. Meanwhile, the weak German mark sent share prices tumbling in Frankfurt, with the DAX 30-share index closing at 1,498.44, down 17.06.
Credit
Government bond prices ended mixed after a session in which the market appeared confused about the outlook for the economy, traders and economists said.
The price of the Treasury’s bellwether 30-year bond rose 5/32 point, or about $1.56 for each $1,000 in face value. Its yield fell to 8.30% from 8.32% late Monday.
But prices of shorter-term government notes closed unchanged or lower in price.
Bond prices fell in the morning after the government reported that the slump in factory orders wasn’t as bad as predicted. News of economic improvement often boosts bonds because it makes it less likely that the Federal Reserve will ease interest rates to boost the economy, which stimulates bond prices as well.
Later in the day, most bond prices rose after the Treasury successfully completed an auction of two-year securities.
The federal funds rate, the interest on overnight loans between banks, was quoted at 6%, down from 6.125% late Monday.
Currency
The dollar closed at a nine-month high against the German mark, bolstered by optimism about the U.S. economy and concern over events in Germany and the Soviet Union.
But the bullish sentiment was offset by profit taking that stemmed the dollar’s rise. The U.S. currency closed lower against the yen after intervention by Japan’s central bank.
In New York, the dollar ended at 1.6870 marks, up from 1.6865 Monday, and at 138.80 Japanese yen, down from 139.20.
The dollar closed at its highest level against the mark since last June 15, when it hit 1.6880 marks.
The dollar--rebounding from a record low against the mark that it hit about six weeks ago--was boosted by optimism that the U.S. recession may end soon and concern over developments in Germany, traders said.
The dollar was supported by the consumer confidence report and the Commerce Department’s durable goods report.
The mark, meanwhile, is burdened by mounting difficulties associated with Germany’s unification and growing turmoil in the Soviet Union.
The pound fell in New York to $1.7580 from late Monday’s $1.7477.
Other late dollar rates in New York, compared to late Monday, included: 1.4330 Swiss francs, down from 1.4370; 5.7240 French francs, down from 5.7265; 1,253.00 Italian lire, unchanged; 1.1602 Canadian dollars, down from 1.1618.
Commodities
A persistent rumor that the Soviet Union might be about to sell large quantities of bullion sent gold futures prices lower.
On other markets, livestock and meat futures were mixed, grain and soybeans were lower and energy futures advanced.
“There’s nothing new here, but the Soviet stories just resurfaced,” said Bette Raptopoulos, metals analyst in New York with Prudential Securities Inc.
With sub-par oil production, the Soviet Union needs hard currency to pay for its imports, but there’s no evidence it is selling any more gold than usual, she said.
Some Mideast countries have been selling gold to finance their recovery from the war. But here, too, the sales have been modest.
“The quantities are not large, but the perceptions that they might sell larger amounts of gold is moving the market,” Raptopoulos said.
In addition to the rumors, the recently strong dollar remains a depressant on the gold market.
Silver and platinum futures also moved lower, failing to respond to a couple of mildly encouraging economic reports. These included an improved consumer confidence index and a more restrained decline than expected in the sales of durable goods.
Gold on the Commodity Exchange in New York settled $1.50 to $1.80 lower, with the contract for delivery in April at $357.60 an ounce; and silver was 4.5 cents to 5.4 cents lower, with March at $3.881 an ounce.
Gasoline futures led energy prices higher on the New York Mercantile Exchange.
With the market expecting a weekly industry report to show a decline in gasoline stocks, futures advanced more than a penny a gallon before giving up some of the gains.
When the American Petroleum Institute released its data after the close, it showed a much larger decline in gasoline stocks--4.54 million barrels--than had been expected. Further, crude oil stocks also declined whereas an increase had been expected.
Light, sweet crude oil settled 14 to 31 cents higher, with the May contract at $19.76 a barrel; heating oil was 0.14 to 0.75 cent higher, with April at 56.80 cents a gallon; unleaded gasoline was 0.50 to 0.84 cent higher, with April at 70.48 cents a gallon; and natural gas was 1.2 cents lower to 0.8 cent higher, with May at $1.395 per 1,000 cubic feet.
Market Roundup, D6
Consumer Confidence From a monthly survey of 5,000 U.S. households F*: 59.4 M**: 81.0 * Revised figure ** Preliminary figure Source: The Conference Board
