L.A. Peace Spurs Dow to Record : Markets: The stock barometer jumps 42.04 points to 3,378.13. Oil prices reach their high for the year.
Blue chip stocks soared to a record close Monday as investors cheered the restoration of peace in riot-torn Los Angeles and other cities.
The Dow Jones average rose 42.04 points, or 1.3%, to 3,378.13. It was the 18th record close for the Dow this year, surpassing the 3,366.50 set April 16.
Oil prices also set record highs on commodity exchanges.
“The fact that our urban communities survived the weekend is 95% of the reason for the lift (in stocks) today,” said Alfred Goldman, director of technical research at A. G. Edwards & Sons. “Market participants took a deep sigh of relief.”
In the broader market, advancing issues outnumbered declining ones by 2 to 1 on the New York Stock Exchange. But Big Board volume was a moderate 174.54 million shares, down from 177.39 million Friday.
The market opened higher and stayed there as institutions reversed stock sales made Friday out of fear that civil unrest prompted by the Rodney King verdict would spread to other cities.
The rioting had poisoned the stock market’s mood Friday, when the Dow fell 23 points, erasing momentum from a two-day rally that brought the market barometer to near-record levels.
“The market had anticipated a much worse weekend in L.A. and in the country than happened,” said Tom Gallagher, head stock trader at Oppenheimer & Co.
Big Board restrictions on computer-driven program trading were activated when the Dow hit a 50-point gain in midafternoon. The average, and the broader market, were lower the rest of the day.
Market highlights:
* IBM, which rose 1 7/8 to 92 1/2 in heavy trading, was among the issues boosting the Dow. Among other Dow components, Merck gained 3 5/8 to 147 1/2 in active dealings to lead the health sector. Goodyear rose 2 1/4 to 73 3/4.
* Health and biotechnology were the strongest industries, receiving a boost from a favorable article in Barron’s magazine over the weekend.
On the NASDAQ over-the-counter market, Amgen rose 1 1/4 to 56. Chiron, which received a recommendation from Merrill Lynch, gained 6 1/4 to 48, and Synergen rose 2 1/4 to 41 1/4.
On the NYSE, Bristol-Myers Squibb rose 1 1/4 to 76, Abbott Labs gained 2 1/8 to 67 5/8, Syntex climbed 1 5/8 to 45 1/4, and Glaxo Holdings gained 1 to 26 5/8.
* Brokerage stocks were up, rebounding from recent declines. Morgan Stanley rose 2 3/4 to 52 1/8, Salomon 1 7/8 to 33 1/8, PaineWebber 1 to 21 1/2 and Charles Schwab 3/4 to 29 5/8.
* Boeing Co. lost 1/2 to 43 1/4. Morgan Stanley & Co. removed the aircraft manufacturer from its model portfolio.
* Among other industrial issues, Waste Management rose 1 3/8 to 38 3/4, Ford Motor edged up 5/8 to 44 7/8, and Norfolk Southern jumped 2 3/4 to 66 1/4.
Despite the rally and new Dow high, traders said Monday’s relatively light volume reflected concern about the state of the economy.
They said two key developments this week could shape the market’s near-term course: the Treasury’s $36-billion quarterly refunding auction today through Thursday and the release of April employment data Friday.
“If we don’t get the right economic numbers, I think the market is going to trade down,” said Edward J. Shopkorn, a managing partner with Mabon Securities Corp.
In overseas trading, German stocks closed lower on concern over the widening impact of public strikes. Frankfurt’s 30-share DAX average fell 5.74 points to 1,728.29.
The Tokyo and London markets were closed for holidays.
Credit
Treasury bonds prices were mixed, with many traders sitting out the session in anticipation of an impending refunding auction.
The price of the Treasury’s bellwether 30-year bond fell 3/16 point, or $1.87 per $1,000 in face amount. Its yield, which rises when prices fall, was 8.016%, up from 8% Friday.
The market lacked momentum, with no new economic reports unveiled and exchanges in London and Tokyo closed for holidays.
Elliott Platt, research director for Donaldson, Lufkin & Jenrette Securities Corp., said the bond market “was just kind of drifting, off ahead of the refunding.”
The Treasury plans to auction $15 billion in three-year notes today, $11 billion in 10-year notes Wednesday and $10 billion in 30-year bonds Thursday. The auctions are part of the government’s quarterly refinancing of the federal budget. They are closely watched by bond traders because the new supply can depress prices.
Kevin Flanagan, economist for Dean Witter Reynolds Inc., said bond dealers were siphoning profits from the market’s rise Friday.
The selling “was nothing too meaningful,” Flanagan said. Platt viewed the selling as traders taking defensive positions ahead of Tuesday’s auction of $15 billion in three-year notes.
The federal funds rate, the interest on overnight loans between banks, was 3.625%, the same as Friday.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds closed at 95, unchanged from Friday. The average yield to maturity was 6.72%, unchanged from Friday.
Currency
The dollar rose in dealings quieted by holidays in London and Tokyo, two key currency markets.
Trading was particularly quiet as financial markets in Britain were shut for May Day and in Japan for Constitution Day.
Analysts said the dollar opened higher in domestic dealings. Traders tried to sell it down, but it recovered on technical buying.
Marc Chandler, an analyst with the advisory firm IDEA, called the trading “the calm before the storm.” He said the Bundesbank council’s scheduled meeting Thursday in Germany and Friday’s release of U.S. unemployment data for April could pull the dollar out of its recent tight trading range.
There are rumors that Germany’s central bankers may lift interest rates, putting U.S. rates at even more of a disadvantage in terms of demand for the dollar. Similarly, speculation is brewing that the Federal Reserve may lower U.S. interest rates by the end of the month.
“Interest-rate differentials are capping the dollar’s upside momentum, while some buying is capping the downside,” Chandler said.
He called the current spread between U.S. and foreign rates “unprecedented. Overnight rates here are about 3.75%; in Germany they’re 9.60%,” Chandler said. “That illustrates why the dollar can’t rise.”
Higher rates abroad make foreign fixed-income securities more attractive to investors, thereby increasing their need for foreign currencies. In the past, relatively high U.S. rates have lured investors and enhanced the value of the dollar.
In New York the dollar settled at 133.20 yen, up from 132.65 Friday, and 1.647 German marks, up from 1.6415.
The British pound cost $1.779, less expensive than Friday’s $1.787.
Commodities
Oil prices soared to new highs for the year, driven up by a buying spree in the gasoline pit.
On other commodity markets, wheat and corn futures prices surged; soybean and oat futures closed higher; livestock and meat futures were mostly higher, and precious metals were mixed.
Light, sweet crude oil for delivery in June settled at $21.12 per barrel, up 27 cents, as it extended gains of last week on the New York Mercantile Exchange. Oil for next-month delivery had not closed that high since Nov. 29, when the final price was $21.48 a barrel.
Unleaded gasoline for delivery in June settled at 66.45 cents a gallon, up 1.76 cents. Home heating oil for delivery in June settled at 57.56 cents a gallon, up .86 cent.
Traders said strong demand for gasoline futures pulled the rest of the market higher.
As the summer driving season nears, wholesale cash gasoline prices have been firming. Traders were also concerned that the public employees strike in Germany will push prices higher as Germans are forced to use automobiles while mass transit is shut down.
Meanwhile, gold and platinum futures retreated amid profit taking from Friday’s surge. On New York’s Commodity Exchange, gold for June delivery dropped $1.70 to $337.60 an ounce. May silver rose 0.5 cent to $4.002 an ounce. July platinum fell $2.30 on the New York Mercantile Exchange to $353.10 an ounce.
Market Roundup, D8
