Dow Rises to 19th Record of the Year : Stocks: An anticipated cut in interest rates propels Wall Street. The blue chip index adds 28.17 to close near 3,400.
The Dow Jones industrial average hit a record high Monday, propelled by the belief that the slow economic recovery could prompt another cut in interest rates.
Stock prices rose broadly, but the third straight session of light trading dampened enthusiasm.
The Dow average of 30 big-company stocks rose 28.17 points to close at 3,397.58, eclipsing the previous mark of 3,378.15 set May 4. It was the Dow’s 19th record this year.
In the broader market, advancing issues outnumbered declining ones by about 7 to 4 on the New York Stock Exchange.
On the year’s fifth-slowest day, volume on the floor of the Big Board came to 157.61 million shares, down from Friday’s 168.73 million and well off the record first-quarter average of 216.5 million.
Wall Street sentiment was also boosted by increases in overseas markets, especially Tokyo, where the 225-share Nikkei average surged 232.14 points, or 1.3%, to 18,608.09.
Elsewhere, London’s Financial Times 100-share average hit its fourth straight all-time high, closing at 2,737.8, up 12.1 points. Frankfurt’s 30-share DAX average ended 4.85 points higher at 1,753.03.
“The foreign markets certainly were a help, Japan particularly. Clearly the bond market has been helpful here too,” said Jack Conlon, managing director at Rothschild Inc. “The market is anticipating a rate cut.”
Analysts said investors were betting that the Fed will lower interest rates to make sure the recovering economy does not suffer a relapse. The Fed last cut rates April 9.
“Today’s strength is not reflective of any economic data that should push the market up at this point,” said Joseph Barthel, director of investment strategy at Fahnestock & Co. “What we will ultimately need is some Fed easing.”
Many analysts say the central bank will cut rates in the short term, despite unexpected strength in the April jobs report, released Friday. They note that although the economy is recovering, the strength of the rebound varies considerably by region and industry.
“The perception is that with weak money supply, the Fed still has to do something,” said Ned Collins, executive vice president in charge of U.S. equity trading at Daiwa Securities. “I felt we would see a minor new high this week, but I’m not sure it means much unless the Fed does something.”
Analysts said the easing could follow a meeting of the Fed’s policy-making Open Market Committee meeting May 19.
Among the market highlights:
* Unilever led the NYSE most-active list, finishing up 1 3/4 at 104 7/8. IBM rose 3/4 to 93 7/8, Duke Power gained 1/2 to 34 1/2, RJR Nabisco gained 1/8 to 10, and Wal-Mart increased 7/8 to 52 7/8.
* Global Marine, which rose 1/8 to 1 7/8 Friday after announcing a large litigation settlement, finished unchanged in heavy dealings.
* Wells Fargo rose 3 7/8 to 85 5/8, and First Interstate climbed 2 1/2 to 44 3/8 as longstanding rumors of a possible merger between the two banking companies resurfaced this morning.
A First Interstate spokesman declined to comment on the speculation and the stock activity, as did a spokesman from Wells Fargo. Analysts dismiss the speculation, saying that while the potential for such a combination is strong, the timing is wrong.
* Banc One Corp. rose 3/4 to 44 3/4. Brown Bros. analyst Nancy Bush upgraded her rating on the regional giant.
On the Amex, Hasbro gained 1/2 to 26 1/8 as Donaldson, Lufkin & Jenrette recommended the stock. Go-Video fell 1/2 to 3 after four shareholders filed a lawsuit accusing the maker of video communications products of misrepresenting its prospects.
* On the NASDAQ, which gained 1.37 to 587.13, Seagate Technology rose 3/8 to 16 3/8, Tele-Communications gained 1/2 to 18 1/4, and SynOptics rose 1 1/2 to 26 5/8. Tandon, a personal computer maker that reached a marketing agreement with a Wal-Mart chain, gained 1/8 to 1 13/16.
Credit
The optimism about lower interest rates and inflation pushed Treasury bond prices higher in quiet trading.
The price of the Treasury’s bellwether 30-year bond rose 3/32 point, or 94 cents per $1,000 in face amount. Its yield was 7.89%, unchanged from late Friday.
With no fresh economic news to drive trading, bonds continued to rise on momentum from an almost one-point jump Friday, said Kevin Flanagan, a money market economist for Dean Witter Reynolds Inc.
“The performance reflects the new positive sentiment in the market,” Flanagan said.
Friday’s unemployment figures, which were strong but indicated that the economic recovery is still weak, helped the market Monday. “The data indicated no inflationary or interest-rate pressures,” Flanagan said.
The federal funds rate, the interest on overnight loans between banks, rose to 3.813% from 3.688% late Friday.
Currency
The dollar settled mostly lower in extremely quiet foreign exchange dealings.
Analysts said the dollar remained locked in a trading range, with virtually no news to influence its direction.
Michael Malpede, an analyst with Refco Inc. in Chicago, attributed the dollar’s decline to two factors--steady monetary policy in Germany and skepticism over the strength of the U.S. economic recovery.
“Until monetary policy changes in Germany, interest rate differentials” favor a lower dollar, he said. German interest rates are at historically high levels, which translate to attractive returns for those who invest in mark-denominated securities.
The dollar fell in New York to 1.639 German marks, down from 1.645 late Friday, and to 133.00 Japanese yen, down from 133.45.
Credit
Wheat futures prices fell moderately Monday on the Chicago Board of Trade after a rainy weekend in parts of Kansas, but some analysts predicted that prices would bounce back on forecasts for hot, dry weather.
Other grain and soybean futures settled mostly lower. On other commodity markets, livestock and meat futures retreated; oil futures advanced, and precious metals edged higher.
Wheat for delivery in May fell 3.50 cents to $3.775 a bushel; May corn fell 2.50 cents to $2.528 a bushel; May oats slipped 0.50 cent to $1.425 a bushel; May soybeans ended unchanged at $5.895 a bushel.
Meanwhile, light, sweet crude oil for June delivery rose 14 cents to $21 a barrel on the New York Mercantile Exchange.
Gold and silver futures rose slightly on New York’s Commodity Exchange, reflecting optimism about the economy. June gold ended 70 cents higher at $337 an ounce, and May silver rose 1.5 cents to $4.092 an ounce.
Market Roundup, D8
