Dow Climbs 60.60, or 1.9%, to Get Back on Record-Setting Track : Markets: Stocks gain even as bond yields inch higher; rumors about a surge in consumer confidence drive some buyers.
Wall Street staged another record-breaking rally on Tuesday, as an avalanche of dollars poured into stocks after just two days of profit taking.
The Dow Jones industrial average soared 60.60 points, or 1.9%, to a record 3,246.20. Most other market indexes also advanced to all-time highs.
“We’ve got a stampede on the upside, there’s no doubt about it,” said Robert O’Toole Sr., head of over-the-counter stock trading at Shearson Lehman Bros. in New York.
From Dec. 17 through last Thursday, the Dow had jumped 307.25 points, from 2,902.28 to 3,209.53, with barely a pause. But after the index lost 10 points Friday and 13.86 points Monday, some analysts suggested that a selloff was beginning.
Tuesday’s surge signaled that the number of investors eager to buy stocks may be so huge that stocks are unlikely to be hit with a substantial selloff soon.
“Money flow (into stocks) still is very strong,” said Brad Ebner at Statistical Sciences Inc., a Beverly Hills money manager.
His firm uses computer programs to measure investors’ hunger for stocks by watching trading patterns in individual issues throughout the day. Despite the market’s sharp rise since mid-December, Ebner said demand for many stocks is getting stronger rather than diminishing.
Traders say buyers continue to be drawn to the market by hopes of a strengthening economy and by a simple lack of alternative investments: With short-term interest rates at 27-year lows and real estate depressed, many investors see the stock market as their only hope for decent returns.
Tuesday, stocks were helped by rumors that a nationwide poll shows a dramatic rise in consumer confidence, which would be bullish for the economy. The poll, by the University of Michigan, is due out Thursday.
On the New York Stock Exchange, winners beat losers by a 12 to 5 margin, as trading volume jumped to 265.90 million shares from 200.42 million Monday.
Some analysts have been concerned that fourth-quarter corporate profit reports, which have begun to trickle out, could ultimately disappoint investors.
Also, if bond yields continue to inch up from their recent lows, investors could be spooked by prospects for higher interest rates.
But for now, big and small investors alike are profoundly bullish, and “that’s feeding on itself,” said Shearson’s O’Toole.
Among the market highlights:
* The Dow’s gains were across all industry groups. Goodyear rose 2 5/8 to 57 7/8, 3M jumped 2 3/8 to 97 1/2, Disney leaped 4 to 130 3/4, and Texaco added 2 1/8 to 61 1/8.
* Smaller stocks surged, but in a departure from last week the NASDAQ composite index lagged the Dow: The NASDAQ rose 8.12 points, or 1.3%, to a record 625.75.
NASDAQ leaders included biotech firms Cytogen (up 9 to 105 1/4) and Gensia (up 5 to 66 3/4); software firm Xilinx, up 5 to 29 3/4 on a strong earnings report, and Irvine-based medical-laser firm Trimedyne, up 3 5/8 to 14 5/8 after federal approval of a new surgical device.
* Computer-related stocks also gained on economic hopes. Apple rose 2 1/2 to 64 1/2, Compaq surged 2 3/8 to 33 1/4, Adobe Systems shot up 4 1/4 to 64, and Computer Associates added 7/8 to 12 1/2.
* Many drug issues that have led the recent rally were hit by profit taking. Abbott Labs, which reported a 14% rise in fourth-quarter earnings, slipped 1/8 to 64 7/8. Pfizer dropped 1 to 83 1/2, and Johnson & Johnson gave up 1 3/8 to 113 5/8.
* Among retailers, Price slid 1 3/4 to 47 after it reported virtually flat fourth-quarter earnings. But many other retailers rallied, including Wet Seal, up 1 5/8 to 11 5/8; ClothesTime, up 1 to 9 3/8, and Value Merchants, up 3 1/4 to 38 3/4.
Overseas, London stocks surged at the close, helped by Wall Street’s strong opening. The 100-share Financial Times average gained 26.2 points to 2,516.3, its highest close since Nov. 15.
In Frankfurt, the DAX average added 5.86 points to 1,628.53.
In Tokyo, stocks stabilized after Monday’s 685-point plunge. The Nikkei average rose 78.27 points to 21,775.13.
Credit
Treasury bond yields inched higher in what analysts said was a continued reaction to Friday’s unemployment report.
The Treasury’s 30-year bond fell 15/32 point, or $4.69 per $1,000. Its yield, which moves in the opposite direction from price, rose to 7.54% from 7.50% Monday.
Traders believe that the December jobless report and recent comments by Federal Reserve Chairman Alan Greenspan indicate that the central bank has no plans to lower rates in the near future.
The jobless report showed larger-than-expected gains in non-farm employment, implying economic improvement. That could keep the Fed from feeling the need to ease credit again.
Analysts also said that big investors were selling bonds to buy stocks, because the perception is growing that stocks will provide better returns than bonds in 1992.
Meanwhile, the federal funds rate, the interest on overnight loans between banks, was at 4%, up from 3.875% Monday.
Currency
The dollar rose against most currencies, especially the German mark.
The jump against the mark, which involved heavy trading, came after reports of strained talks between the Bundesbank and a leading German metal workers union.
Also hurting the mark was the prospect of a walkout by German bank employees.
Fear of wage inflation led the Bundesbank to raise interest rates in Germany last month, which rallied the mark. But in recent days the mark has plunged on worries that Germany’s economy will slow.
The dollar jumped to 1.593 marks in New York from 1.577 Monday. It slipped to 126.85 Japanese yen from 127.00.
Commodities
Ample supplies of heating oil and an ongoing mild winter combined to drive energy futures lower on the New York Merc. Light, sweet crude oil for February lost 32 cents to $18.47 a barrel.
Elsewhere, wheat soared on the Chicago Board of Trade in response to reports of dwindling supplies at storehouses.
Gold rose on New York’s Comex, following gains in the dollar. The January contract added 80 cents to $354.60 an ounce; January silver rose 1.2 cents to $4.08.
Market Roundup, D6
TINY GAIN AT CASH REGISTERS
Retail sales in 1991 showed the smallest year-to-year gain in three decades. D2
