Dow Rockets 53.71; Bank Earnings Spur Major Stock Rally
Stocks staged an explosive rally Tuesday amid better-than-expected first-quarter earnings reports from banks and hopes for lower interest rates and an upturn in the economy.
The Dow Jones industrial average soared 53.71 points, its fifth gain in a row and its strongest in two weeks, to close at 2,986.88. The 1.8% rise put the closely watched barometer within easy striking distance of its all-time closing high of 2,999.75--as well as the psychologically important barrier of 3,000.
Volume on the New York Stock Exchange totaled 214.48 million shares, up from 161.80 million on Monday, as advancers led decliners 1,129 to 520.
Demand for stocks was so strong that the Big Board’s “circuit breaker,” which is designed to tone down volatile price swings, kicked in at 3:38 p.m. EDT. The circuit breaker, which restricts certain kinds of computer-driven program trading, is triggered when the Dow moves up or down 50 points from the previous day’s close.
While the Dow closed short of its record, several other indexes set highs. The NASDAQ composite index of over-the-counter stocks, after stumbling on Monday, closed at 506.75, up 5.91 points, or 1.2%. The NYSE composite index and the Standard & Poor’s 500 also set records.
“What we are seeing here is an unrelenting appetite for equities,” said Larry Wachtel, senior vice president and market analyst for Prudential Securities. “Where it will stop, nobody knows.”
Wachtel argued that with real estate in a slump and bank certificates of deposit yielding an “unappetizing” 6%, “there is a lack of attractive investment alternatives to the stock market.”
“Tuesday was really a case of the Dow catching up to the rest of the market,” added Michael Metz, chief market strategist for Oppenheimer & Co.
Among the market highlights:
Leading the Dow higher were Merck, up 3 3/8 to 113; Philip Morris, up 1 3/4 to 71 5/8; American Express, up 2 1/8 to 29 3/8, and IBM, up 2 3/8 to 109 1/4.
Major gainers among financial stocks included Wells Fargo, up 7 1/2 to 80; Security Pacific, up 1 7/8 to 26 1/4; First Interstate, up 2 to 34 1/2, and Merrill Lynch, up 1 3/4 to 41 1/4.
Among health-care stocks, which have been red-hot all year, Lilly jumped 2 1/8 to 83 3/4, Syntex gained 2 to 84 1/2, Johnson & Johnson added 3 1/4 to 100 1/4 and Amgen gained 1 1/2 to 133 1/2.
Santa Barbara-based Mentor Corp. rebounded 2 3/8 to 21 3/4 after falling 6 7/8 on Monday following news that the Food and Drug Administration would approve the firm’s new anti-incontinence drug only for men.
Apple Computer recovered 2 to 64 1/4 after diving 9 1/2 on Monday in the wake of a disappointing earnings report. But many other personal-computer stocks remained weak. AST Research lost 1 3/4 to 28 1/2, Advanced Logic fell 1 3/4 to 17 3/4 and Compaq added just 5/8 to 62.
An exception was Tandon Corp., up 9/16 to 4 1/2. It was the most active NASDAQ stock. Some traders appear to be anticipating a surprisingly good quarterly earnings report.
Smaller Southland NASDAQ stocks rising sharply included filter-maker Farr Co., up 1 to 11 3/4; plastics firm Cimco, up 3/4 to 11, and computer tape-drive maker Rexon, up 1 1/8 to 10 7/8.
In London, stocks closed lower in quiet trading with the Financial Times 100-share index falling 23.3 points to 2,519.5. The 30-share DAX index in Frankfurt, Germany, closed above the important 1,600-point level for the second straight day, rising 1.94 points to 1,603.36. And in Tokyo, the 225-share Nikkei index rose 117.77 points to 26,813.30.
Credit
Bond prices crept slightly higher in light trading as credit market participants awaited fresh signals of the economy’s direction.
The Treasury’s bellwether 30-year bond was up 5/32 point, or $1.56 per $1,000 in face amount. Its yield, which falls when prices rise, was 8.11%, down from 8.13% late Monday.
Currency
The dollar, stymied by uncertainty over the direction of U.S. interest rates, turned in a mixed performance against other major currencies.
In New York, the dollar closed at 1.6648 German marks, down from 1.6710 at Monday’s close. But it closed higher against the Japanese yen, finishing at 134.60 yen, up from Monday’s 134.25. The dollar also gained ground against the British pound, with sterling falling to $1.7905 from late Monday’s $1.7910.
Commodities
Oil prices fell after a string of recent gains, but traders said prices could begin rising again after a report showing that gasoline supplies shrank further last week.
Crude oil for May delivery fell 27 cents to $21.64 a barrel on the New York Mercantile Exchange. May unleaded gasoline, which has led the recent rally in energy prices, fell 0.34 to 72.29 cents a gallon.
Gold futures were mixed and silver futures rose modestly in quiet trading on New York’s Commodity Exchange. Gold settled 20 cents lower to 10 cents higher, with April at $361.40 an ounce; silver was 2.9 to 3 cents higher, with May at $4.02 an ounce.
Market Roundup, D6
