Dow Surges 62.39 as Stock Rally Widens
Wall Street’s spectacular year-end rally continued Monday as buyers snapped up a broadening mix of stocks--suggesting interest isn’t waning despite eight straight days of gains.
The Dow Jones industrial average surged 62.39 points or 2% to a new record close of 3,163.91. Most other broad market indexes also hit new highs, including the chief small-stock average, the NASDAQ composite, which jumped 14.04 points or 2.5% to 579.75.
“It’s gone further than anyone anticipated, and then some,” said Harry Laubscher, market analyst at brokerage Tucker Anthony.
The market built a powerful upward momentum Monday that swamped early-morning sellers in hectic trading, analysts said. Volume on the New York Stock Exchange soared to 245.60 million shares from 156 million on Friday.
The jump in volume belied suggestions last week that many professional investors would remain away on Christmas or New Year’s holiday and ignore the market’s surprise rally.
On the Big Board, gainers outnumbered losers 1,382 to 466; among NASDAQ stocks, gainers beat losers 1,251 to 654.
Wall Street’s advance was again aided by falling interest rates, as the yield on 30-year Treasury bonds fell below 7.5% for the first time since February, 1987, though bond trading was light.
Stocks’ year-end drive has been fueled largely by the Federal Reserve’s Dec. 20 cut in its key discount rate to 3.5%, the lowest in 27 years. It was the boldest step yet in the Fed’s campaign to spur economic growth.
On Monday, new economic statistics for December provided more proof that the Fed’s rate cut was needed, analysts said. The New York-based Conference Board, a private research group, said its consumer confidence index slipped to 52.4 this month from a revised 52.7 in November.
And the Chicago Purchasing Managers index, a gauge of industrial activity, dropped to 46% for December from 53.2% in November. A reading below 50% suggests that the economy is slowing.
Despite the signs of gloom, buyers on Wall Street appear convinced that lower interest rates will lead to a resurgent economy in 1992, analysts say.
Before the new trading week began, the Bank of Japan unexpectedly lowered its discount rate from 5% to 4.5%, which helped U.S. stocks by holding out the promise of a healthier Japanese economy in the new year. That could increase demand for U.S. exports.
The Japanese rate cut sent Tokyo’s Nikkei average up 546.45 points or 2.4% to 22,983.77. The Tokyo market now is closed for New Year’s holidays until Monday.
Among the highlights in Wall Street’s rally:
* Big gains in two disparate stock groups--industrial issues and drug stocks--illustrated the broad nature of the rally.
Industrial stocks rising on hopes for a healthy economy ahead included Monsanto, up 4 1/4 to 69; Illinois Tool, up 2 3/4 to 61 1/2; Eaton, up 3 to 63 7/8; and Kimberly-Clark, up 3 7/8 to 101 7/8.
Among drug winners, Pfizer soared 4 to 85 3/4, Bristol-Myers Squibb jumped 2 1/8 to 87, Amgen rocketed 3 7/8 to 69 3/8 and Centocor rose 2 3/4 to 51.
* Airlines and railroads continued to soar on expectations of an economic turnaround in 1992. AMR, parent of American Air, jumped 2 3/8 to 70 3/8, a new 1991 high. Conrail gained 2 1/2 to 84, also a new high, and rival Norfolk Southern rose 2 3/4 to 59 3/4.
* The Dow was powered by key stocks Philip Morris, up 3 1/2 to 80 5/8; Goodyear, up 3 1/2 to 53 3/4; GE, up 2 7/8 to 76 7/8, and Procter & Gamble, up 3 3/8 to 93 3/4.
* Shares of several medical technology firms, favorites all year, gained after analysts upgraded ratings on them. Tokos Medical rocketed 3 5/8 to 45 1/8, Medtronic surged 5 7/8 to 91 and Cordis climbed 3 1/8 to 30 3/4.
* Among the few drug-stock losers, Upjohn declined 1 1/4 to 41 after the French Health Ministry suspended sales of higher-dosage tablets of its sleeping pill, Halcion. Upjohn said it will appeal.
* Crop Genetics jumped 2 1/2 to 10 1/4 on news of a deal with Du Pont to commercialize a line of viruses that can kill insects.
* Brokerage stocks rolled up gains on optimism about the bull market’s longevity. Merrill Lynch jumped 2 7/8 to 59 7/8, Morgan Stanley added 2 7/8 to 63 7/8, A. G. Edwards rose 2 5/8 to 37 1/8 and Charles Schwab soared 2 5/8 to 29 1/8.
* Many electric utilities continued to benefit from falling interest rates, which heighten the appeal of their dividends to yield-conscious investors. Duke Power added 1 to 34 1/2, Potomac Electric rose 1/2 to 25 and SCEcorp gained 3/4 to 46 3/4.
Overseas, the London market inched higher, with the Financial Times 100-stock index up 1.3 points to 2,420.0. In Frankfurt, the DAX 30-share index closed at 1,577.98, up 14.39 points.
Credit
Government bond prices gained sharply on news of more economic weakness, but analysts said the rally’s significance was questionable because trading was light.
The price of the Treasury’s bellwether 30-year bond rose 7/8 point, or about $8.75 per $1,000 in face amount. Its yield, which drops when prices rise, fell to 7.44% from 7.51% Friday.
William Sullivan, director of money market research at Dean Witter Reynolds Inc., attributed the rally to the gloomy reports on consumer confidence and corporate purchasing activity.
Bond traders viewed the reports as signs that the Federal Reserve will continue to ease interest rates to encourage borrowing and spending, Sullivan said. Bond prices rise on expectation of lower rates, which make existing fixed-income securities worth more.
The federal funds rate, the interest on overnight loans between banks, was 3.5%, up from 3% Friday.
Currency
The dollar ended mixed in light trading, rising initially on lower interest rates in Japan and travails in the former Soviet republics but weakening on pessimism about the American economy.
Foreign exchange traders said volume was extremely light. Since both Christmas and New Year’s fall on Wednesdays this year, many participants are simply taking the last two weeks of December off.
In New York, the dollar was at 125.60 yen, down from 125.93 Friday. It was at 1.5192 German marks, up from 1.5188. The British pound fetched $1.8670, cheaper than Friday’s $1.8740.
Other dollar rates in New York, compared to Friday: 1.3555 Swiss francs, up from 1.3510; 1.1578 Canadian dollars, down from 1.1606; 5.1905 French francs, unchanged, and 1,151.75 Italian lire, unchanged.
Commodities
Wheat and soybean futures prices fell sharply on the Chicago Board of Trade amid growing fears that trouble between the former Soviet republics could jeopardize plans to ship U.S. food aid to them. Corn and oat futures also retreated.
On other commodity markets, cattle futures surged, pork futures were mixed, energy futures were mixed and precious metals were lower.
Wheat for delivery in March fell 7 cents to $3.97 3/4 a bushel, March corn fell 2 1/2 cents to $2.51 3/4 a bushel, March oats dropped 1 1/2 cents to $1.36 3/4 a bushel and January soybeans fell 10 cents to $5.52 1/2 a bushel.
Light sweet crude oil for February delivery fell 11 cents to $18.65 a barrel, January home heating oil plunged 2.3 cents to 48.08 cents a gallon, January unleaded gasoline rose .58 cent to 54 cents a gallon and February natural gas rose 0.2 cent to $1.38 per 1,000 cubic feet.
Platinum futures rallied moderately on the New York Mercantile Exchange after falling more than $20 an ounce the past two weeks. Analysts said the rise was fueled in part by optimism about a recovery.
Gold and silver futures fell modestly in thin trading on New York’s Commodity Exchange.
Platinum for January delivery rose $2 to $335.60 an ounce, January gold fell $1.10 to $352.80 an ounce and January silver slipped 1.2 cents to $3.846 an ounce.
Market Roundup, D8
Sizing Up the Rally The stock market’s year-end rally began on Dec. 18. Here’s how key stock indexes have fared since then:
Monday Percent Index close change: Dow transports 1,344.92 +11.5% Dow industrials 3,163.91 +9.0% S&P; 500 415.14 +8.5% S&P; Mid-Cap 145.05 +7.9% NASDAQ composite 579.75 +7.4%
BEHIND THE RALLY
A look at why the surge is happening and what small investors should do. A1
NEW DATA ON ECONOMY
Existing home sales climb; consumer confidence continues its slide. D2
