STOCKS : Falling Interest Rates Help Dow Make 8.50 Gain
The stock market closed nearer its record high, with an assist from declining interest rates.
The Dow Jones industrial average inched up 8.50 points to 3,024.82. The all-time high is 3,035.33 set June 3.
In the first three sessions of this week, the Dow has climbed 52.32 points.
Wednesday, advancing issues outnumbered losers about 3 to 2 on the New York Stock Exchange, where volume totaled 167.31 million shares as of 5 p.m. EDT.
Interest rates dropped further in the credit markets as the government reported that the index of leading economic indicators rose 0.5% in June--weaker than expected. That bolstered hopes for another interest rate cut soon by the Federal Reserve, to keep the economic recovery on track.
Stock investors now seem largely unfazed by the chance that the recession will recur, and are instead betting that another rate cut will make stocks more attractive relative to money market accounts and bonds.
Among the market highlights:
* Medical stocks continued to lead the market higher. Merck gained 1 3/8 to 128 3/4, Abbott Labs rose 1 1/8 to 53 7/8, and Sunrise Medical jumped 2 to 27 1/2. An exception was Southland HMO PacifiCare Health, which tumbled 3 1/2 to 35 1/2 despite reporting sharply higher earnings earlier in the week.
* Investors also flocked back to a number of smaller growth stocks across a wide spectrum of industries. Harley-Davidson jumped 1 3/8 to 41 1/4, Hancock Fabrics added 1 to 23, and Chiquita rose 1 5/8 to 47.
* Mortgage-finance issues gained after the Federal Deposit Insurance Corp. said the market for commercial real estate is stabilizing. Federal Home Loan Mortgage rose 2 7/8 to 89 1/8 and Federal National Mortgage 2 1/8 to 57 3/4. Also, Glendale-based Citadel Holding, owner of Fidelity Federal Savings, gained 2 to 31 1/2 after reporting slightly higher earnings.
* Tech stocks were strong. Teradata jumped 2 to 17 after reporting better-than-expected earnings. Prudential Securities reaffirmed a “buy” on the computer stock. Other tech gainers included Datron Systems, up 1 1/4 to 14 1/2, and Sun Microsystems, up 2 1/4 to 30 5/8.
* Culver City-based IDB Communications tumbled 1 3/8 to 7 1/2. There was no news.
* Among new issues making their debut, Santa Barbara-based retailer Smart & Final went public at 19 and closed at 20 in NYSE trading. And computer networker Wellfleet Communications went public at 17 and rocketed to 22 1/2 in NASDAQ trading.
Overseas, Tokyo’s Nikkei average closed above 24,000 for the first time since July 1. It was up 248.12 points to 24,120.75.
In London, the 100-share Financial Times index fell 6.8 points to 2,588.8. In Frankfurt, the DAX index climbed 7.38 points to 1,622.31.
Credit
Bond yields fell on prospects for another interest rate cut.
The Treasury’s 30-year bond rose 7/16 point, or about $4.38 per $1,000. Its yield dropped to 8.33% from 8.37% Tuesday.
Lackluster reports on factory orders and economic indicators boosted bond prices because they made it more likely that the Federal Reserve will ease interest rates, said Kathleen Camilli, chief economist at Maria Ramirez Capital.
Meanwhile, the Treasury’s announcement of $38 billion in bond sales next week was within the range of expectations, so supply worries diminished.
The federal funds rate, the rate on overnight loans between banks, rose to 5 7/8% from 5 3/4% Tuesday.
Currency
The dollar fell broadly in light trading on new concern about the durability of the U.S. recovery.
Economic weakness hurts the dollar because currency traders are naturally drawn to stronger economies that offer higher interest yields on investments.
The dollar also was hurt by comments by the German central bank’s president-designate signaling that German interest rates may rise again soon.
The dollar fell to 137.36 Japanese yen from Tuesday’s 137.90 in New York, and to 1.744 German marks from 1.753.
Commodities
Energy prices rose on the New York Mercantile Exchange on a report of a sharp downturn in supplies and on persistent rumors of refinery troubles.
Light, sweet crude oil futures settled 5 cents to 26 cents higher, with the contract for delivery in September at $21.68 a barrel.
Elsewhere, grain and soybean prices surged on the Chicago Board of Trade after updated weather forecasts called for less rain than predicted over the weekend.
In metals, gold rose $1 to $1.30, with August at $363.60 an ounce, and silver ended 1 cent to 1.4 cents higher, with August at $4.06.
Market Roundup, D8
How Stocks Did in July
Small growth stocks rebounded in July from their June selloff, leading the market higher. Transportation stocks also were leaders.
July Percentage change: Index close July Year to date H&Q; growth 959.51 +10.9% +50.0% Dow transports 1,220.56 +6.0% +34.1% NASDAQ composite 502.04 +5.5% +34.3% S&P; 500 387.81 +4.5% +17.4% Wilshire 5,000 3,705.89 +4.5% +19.5% NYSE composite 212.34 +4.4% +17.6% Dow industrials 3,024.82 +4.1% +14.9% AMEX mkt. value 368.28 +2.8% +19.5% Dow utilities 201.77 +2.5% -3.8%
