Year-End Buying Pushes Dow and S&P; 500 to Record Highs
Stocks surged to record highs Monday on the strength of year-end demand and relatively few sellers, pushing the Dow Jones industrial average within striking distance of 3,800 points.
A year-end buying spree gave blue-chips and oil stocks a big boost, while several foreign markets continued to post sharp increases. The gains in U.S. stocks were exaggerated by the lightest trading volume of the year, which gave each purchase a disproportionately high impact on the major market indexes.
The Dow Jones industrial average hit a new record of 3,792.93, up 35.21 points. The previous record, set Dec. 13, was 3,764.43.
The Standard & Poor’s 500 stock index also hit a record high for the first time in 2 1/2 months, closing up 3.17 points at 470.55. The old record was 469.50, set Oct. 15.
The gains came amid a torrid bull market in many emerging world markets, with Mexican stocks scoring a record closing high.
Left out of the rally was Japan, where the stock market closed Monday with steep losses and left the key Nikkei stock index below 17,000 for the first time since Dec. 8.
Stocks often rally at year’s end as many investors who are selling to lock in tax losses or rid themselves of money losers do so earlier in December, then bow out of the market, analysts said. That leaves an excess of buyers.
Many U.S. fund managers load up on stocks just before the new year because they don’t want to show too much cash on hand in their end-of-year accounts.
“Portfolio managers do not want to end the year with 10%, 15% or 20% cash,” said Robert Stovall of Stovall/Twenty-First Advisers.
He said many forecasters are busy compiling lists of the worst-performing stock groups of 1993 in order to pick the stocks with the greatest potential for profits in 1994.
Stovall identified the laggard groups as oils, waste management stocks, pollution control companies, textiles, shoes, health care providers and tobaccos.
He said some investors are buying these stocks now before they get added publicity from analysts.
A case in point was oil shares, which got a bullish recommendation from the brokerage Oppenheimer. Oil shares are a major component of the Dow index, so big movements will affect the market indexes.
Oil prices recently dropped to five-year lows, but the brokerage recommendation suggested the worst may be over and that oil prices may have hit bottom.
Oppenheimer analyst David Chiang upgraded five major oil companies, including Mobil, which rose 1 1/8 to 78 3/8, and Royal Dutch Petroleum, up 7/8 at 106 5/8. Shell gained 3/8 to 65.
Analysts said the strength in Chevron, up 1 at 88 5/8, Exxon, up 1 1/4 at 64 1/4, and Texaco, up 1/8 at 64 1/8, accounted for a large portion of the Dow’s rise.
New York Stock Exchange volume was 170.7 million shares, down from 227.2 million on Thursday. The market was closed Friday for Christmas Eve.
The Nasdaq index gained 2.36 to 761.06 but stayed well shy of its record.
Among the market highlights:
* Medical Care America, a medical services company specializing in outpatient surgery and helping patients get intravenous drugs at home, gained 2 to 23 on the NYSE. The Wall Street Journal reported Monday that a bidding war for the company may take place as at least seven companies are looking at its books with an eye toward a buyout.
* Merck was the most active NYSE-listed issue, rising 1 to 35 1/4. Elsewhere in the drugs sector, Pfizer rose 1 3/4 to 68 7/8, while Eli Lilly rose 3/8 to 59 3/4.
* Among the blue-chips that helped the Dow higher: Caterpillar, up 2 1/8 to 90, and International Paper, up 1 1/2 to 68 1/4.
* Merry-Go-Round, which has fallen recently on news of financial problems, continued to rebound and finished up 5/8 at 3 1/4.
* Stocks of closed-end country funds were in demand, with the gains overseas. Thaifund jumped 4 1/8 to 37 and Singapore Fund 3 7/8 to 23 3/4.
* On the Nasdaq market, shares of biotech drug maker Amgen were up 1 3/4 to 48 1/4 on favorable comments in Barron’s regarding its products, revenue and staff stability.
* On the Paris market, shares in the troubled European theme park company Euro Disney slumped more than 8% following a report that some banks tried to sell their Euro Disney loans at a 45% discount.
Gains in European and most Asian markets also helped domestic markets higher. Stocks closed up 1.4% in Frankfurt and 1.5% in Paris. While the London market was closed, it has also been sharply higher lately.
In Tokyo, the Nikkei average fell 1.9% amid disappointment over a lack of concrete government proposals to boost the economy. But, markets in Taiwan, Singapore, the Philippines and others all gained broadly.
In Mexico City, stock prices rose to a new record close, buoyed by demand for Telefonos de Mexico stock, traders said. The IPC index of 36 leading shares ended 26.50 points higher at 2,593.57 after earlier hitting a new intra-day high of 2,593.62.
Other Markets
Long-term Treasury bond yields rose in extremely light dealings as traders continued coasting into the new year.
The yield of the Treasury’s main 30-year bond rose to 6.23% from 6.21%. Its price, which moves opposite from yield, fell 1/4 point, or $2.50 per $1,000 in face value.
The market closed at 2 p.m. Eastern time Thursday for the Christmas holiday. Activity was thin when trading resumed Monday, with many participants on extended holidays.
There was no news to send prices in either direction, and market participants were reluctant to attach a reason to Monday’s decline in the 30-year bond.
Yields on three-month Treasury bills were up to 3.115% as the discount added 0.01 percentage point to 3.06%. Six-month yields were up to 3.32% as the discount added 0.04 percentage point to 3.23%. One-year yields rose to 3.57% as the discount rose 0.01 point to 3.44%.
Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.
In other markets:
* The dollar rose against the yen and other leading currencies Monday, after weak Japanese economic data and overnight losses in the Nikkei stock index.
The dollar rose to 111.40 yen in late New York trading from 110.60 yen late Thursday.
* Gold bullion rose $2.10 to $389.10 an ounce for the most-active February contract on New York’s Commodity Exchange.
* Crude oil and gasoline prices fell sharply in futures trading, but prices for near-term delivery of home heating oil rose slightly as frigid weather blew through the Northeast.
Light, sweet crude oil for delivery in February settled at $14.13 per barrel, down 35 cents, at the New York Mercantile Exchange.
