Blue-Chips Post Seventh Record High in 2 Weeks : Markets: Dow closes at 3,638.96, up 32.98, fueled by heavy buying of industrial stocks and by another bond rally.
The stock market advanced broadly Tuesday to new highs as a strong earnings report from farm machinery giant Deere & Co. ignited new optimism about the industrial economy.
The market also got a boost from another healthy rally in the bond market, after the U.S. Treasury saw brisk demand at its sale of new two-year notes.
The Dow industrials shot up 32.98 points to a record 3,638.96 in active trading, topping the old high of 3,615.48 set Friday. It was the seventh record high in two weeks.
More important, analysts said, was the breadth of the market’s advance: Winners topped losers by nearly 2 to 1 on the New York Stock Exchange, and most broader indexes hit new highs with the Dow. The Standard & Poor’s 500 index, for example, jumped 4.54 points to 459.77.
“I think the overriding theme is that interest rates are low and there is no place for people to put their money” other than stocks, said George Pirrone, trader at Dreyfus Corp.
But analysts also noted that the market is not advancing on thin air: Rising corporate profits--despite a slow-growing economy--have provided an underpinning for many stocks this summer.
Indeed, Deere said Tuesday that its earnings jumped tenfold in the latest quarter, helped by higher than expected machinery demand from North American farmers. Deere stock soared 5 1/4 to 74, pulling up other machinery makers as well.
Also, auto stocks rebounded on word of a renewed pickup in auto sales this month.
Analysts say the gains in the industrial sector of the economy illustrate that, despite weak overall consumer spending, many businesses continue to spend on big-ticket items that increase their efficiency.
In the bond market, meanwhile, the Treasury sold $16 billion in new two-year notes at a median yield of 3.93%. The government received 3.49 bids for every one accepted for the notes, a high ratio that demonstrated investors’ hunger to lock in yields, analysts said.
The auction’s success sparked a fresh rally in bonds overall, driving interest rates lower, especially on securities in the five- to 10-year maturity range. On the benchmark 30-year T-bond, the yield slipped to a historic low of 6.19% from 6.22% on Monday.
The bond rally “has got a head of steam on it like you wouldn’t believe. There is nothing in the near future that can derail it,” said Joseph Liro, chief economist at S.G. Warburg & Co.
Among the market highlights:
* Industrial stocks following Deere higher included Caterpillar, up 1 3/4 to 82 3/8; Ingersoll-Rand, up 2 5/8 to 38 1/2; Clark Equipment, up 1 1/2 to 43 3/4; Varity, up 1 1/8 to 38 1/4, and Wheeling-Pittsburgh Steel, up 1 5/8 to 12.
* Among autos, GM soared 1 5/8 to 46 3/4, Ford gained 1 5/8 to 51 3/4 and Chrysler added 7/8 to 42 1/4.
* Brokerage stocks tracked the market higher. Merrill Lynch surged 2 1/8 to 94 1/8, Dean Witter leaped 1 7/8 to 39 3/8 and Schwab gained 7/8 to 31 1/4.
* Energy stocks saw new buying. Chevron rose 5/8 to 91 3/8, Unocal added 5/8 to 29 3/8 and Amoco soared 2 to 57 1/2.
* Gambling stocks continued their recent rally. Mirage Resorts rocketed 2 3/8 to 53 3/4, MGM Grand zoomed 1 5/8 to 46 5/8 and Circus Circus rose 1 1/4 to 44.
* Overseas, London’s FTSE-100 index added 7.3 points to 3,049.3, Frankfurt’s DAX index gained 9.42 points to 1,897.69 and Tokyo’s Nikkei index inched up 17.70 points to 20,431.84.
* Elsewhere, the dollar was mixed in New York trading. It rose to 103.65 Japanese yen, up from 103.23 on Monday, on the strength of heavy buying by the Bank of Japan, which is desperately trying to prevent another free fall in the dollar against the yen.
But the dollar fell to 1.678 German marks from 1.685 on Monday as news of higher than expected inflation in a key German state dampened hopes for a new round of interest rate cuts in Germany.
* Near-term gold futures slipped 60 cents to $371.90 an ounce on New York’s Comex. Silver fell 3 cents to $4.73.
* Oil prices pulled back as a possible oil workers’ strike in Nigeria appeared less likely. October crude futures fell 18 cents a barrel to $18.35 on the New York Merc.
