MARKET MILESTONES : Dow Advances 29.07 to Pass the 3,200 Mark
Vaulting above 3,200 for the first time in its ninth consecutive climb and its sixth straight record close, the Dow Jones industrial average jumped 29.07 points to finish at 3,201.48 Friday as the stunning rally spawned by low interest rates roared on.
“This is a classic stampede,” said Stefan Abrams, chief investment strategist at Kidder, Peabody & Co.
Added Michael Metz, investment strategist at Oppenheimer & Co.: “The stock market seems to be the only game in town, and everybody is crowding into the arena.”
The psychologically important but technically meaningless 3,200 barrier fell precisely one week and four trading sessions after the Dow scored its first finish over 3,100 on Dec. 27. The closely watched Dow closed above 3,000 for the first time April 27.
Since stock prices were ignited by the Federal Reserve’s dramatic one-percentage-point cut in the discount rate to 3.5% two weeks ago, the Dow has rocketed 300 points, or more than 10%.
Other market averages hitting record highs Friday included the Standard & Poor’s 500, the New York Stock Exchange composite index and the NASDAQ composite index of over-the-counter stocks.
“They’re buying practically anything,” said Ralph Blair, trader at Montgomery Securities in San Francisco. “There’s a constant rotation as they try to find the stocks that haven’t moved. The only thing that’s been left behind is the garbage.”
Some market watchers urged caution because of the rapidity of the climb. “To me, the market looks a little tired,” Blair said. “I think there’s going to be some profit taking next week.”
Metz too was skeptical of the staying power of what he termed “the buying frenzy,” noting that it is occurring “seemingly without regard to the fundamentals.”
But Hildegard Zagorski, a market analyst at Prudential Securities, said “there is a tidal wave of money coming into the market and waiting to be invested.” And that, she concluded, augurs well for further advances--as investors who were left behind by the market’s great surge jump in on any weakness or profit taking.
On the Big Board, advancers topped decliners 1,078 to 649. Volume was strong for a session during which many institutional investors were on vacation, with 221.3 million shares trading hands.
Among the day’s highlights:
* Auto stocks, which until recently had been neglected, had a day in the sun. GM climbed 1 1/2 to 32 1/2 after rising 2 1/8 Thursday. Ford gained 1 1/4 to 30 3/8, and Chrysler rose 1 to 13 1/2. Analysts said the group benefited from speculation that President Bush’s trade summit in Tokyo could ease pricing pressures on the Big Three.
* Other standout performers included Coca-Cola, up 3 to 83 1/4; drug giant Merck, up 2 1/2 to 168 7/8; Waste Management, up 2 1/4 to 45 1/2; Georgia-Pacific, up 2 3/8 to 58 3/8, and Digital Equipment, up 2 3/8 to 57 7/8.
* Airline issues continued to get economic-recovery play. Delta gained 2 to 68 1/4, and American Airlines parent AMR jumped 2 1/8 to 71 5/8. AMR, which traded as low as 39 3/4 a little over a year ago, hit its highest level since 1989.
* Restaurant stocks were strong. Morrison rose 1 1/2 to 27, IHOP (parent of International House of Pancakes) gained 5/8 to 14 3/4, Carl Karcher added 5/8 to 8 3/4, and Outback Steak jumped 1 to 28 1/2.
* Korea Fund rocketed 1 3/4 to 14 5/8. Effective this week, the South Korean government began allowing foreigners to buy limited amounts of Korean shares directly.
* Litton Industries rose 1 to 91 1/8. Prudential Securities issued a buy recommendation on the stock, citing improved earnings prospects from non-defense businesses.
* Torrance-based Sunrise Medical slipped 3/4 to 36 1/4. After the close of trading, the medical products company projected that profit in the quarter just ended would be 28 to 30 cents a share, down from analysts’ estimate of 35 cents.
Overseas, London stocks rose, with the Financial Times-Stock Exchange 100-share index up 11.3 points at 2,504.1. In Frankfurt, the DAX index ended at 1,603.62, up just 1.74 points on the day. Tokyo markets remained closed for the New Year holidays.
Credit
Treasury bond yields continued to inch up as traders siphoned gains from December’s big rally.
The Treasury’s 30-year bond fell 9/32 point, or $2.81 per $1,000 face amount. Its yield was 7.48%, up from 7.46% Thursday.
Analysts said bonds are undergoing a technical correction as traders sell after the market’s steady rise in December.
Traders also are becoming nervous about the Bush Administration’s upcoming federal budget proposal. Many fear that the budget will include tax cuts, which could lead to a larger federal deficit and mean a flood of new bonds.
The federal funds rate, the rate on overnight loans between banks, fell to 3.25% from 5.5% Thursday.
Currency
The dollar rose broadly, strengthened by weakness in the German mark and speculation that the U.S. currency’s recent selloff may have been overdone.
Traders said there was nothing in the domestic economic news to warrant a rise in the dollar. New government reports showing modest improvements in factory orders and labor productivity did little to suggest that the United States is climbing out of recession.
In New York, the dollar fetched 124.65 Japanese yen, up from 124.60 Thursday. It brought 1.543 marks, up from 1.531.
Commodities
On New York’s Comex, gold for February delivery fell $1.70 to $351.50 an ounce; March silver slipped 0.3 cent to $3.97.
Energy futures settled mixed on the New York Merc as traders took profits in choppy dealings.
Light, sweet crude oil for February fell 26 cents to $19.23 a barrel.
