Year-End Buying Pushes Dow, Foreign Markets to New Highs
U.S. blue-chip stocks surged to record highs Monday on the strength of year-end demand and in the wake of another surge in share prices overseas.
The Dow Jones industrial average jumped 35.21 points, or 0.9%, to a record 3,792.93, eclipsing the old peak of 3,764.43 set Dec. 13.
Significantly, the broader Standard & Poor’s 500 index also hit a new high for the first time in 2 1/2 months. The S&P; jumped 3.16 points to 470.54, topping the old record of 469.50 set Oct. 15.
Some analysts said the broad market’s progress was a good sign because it suggested that demand for stocks is widening beyond the 30 Dow issues.
But the market’s advance was exaggerated by the lightest trading volume of the year--just 171 million shares changed hands on the New York Stock Exchange--which gave each purchase a disproportionately high impact on the major market indexes.
Also, smaller stocks’ gains were limited. The Nasdaq composite index of mostly smaller issues added just 2.36 points to 761.06 and remains well below its 1993 peak of 787.42.
Still, Wall Street traditionalists were cheered by Monday’s rally because it suggests that January could be a strong month, as it has been historically: Once year-end tax-related selling of stocks ends in mid-December, the market often benefits in late December and early January from pent-up demand and from new cash injected by investors starting the new year with a clean slate.
Robert Stovall, analyst at Stovall/Twenty-First Advisers in New York, said Monday’s surge was partly the work of cautious fund managers who have built up too much cash in recent months by staying away from the market.
“Portfolio managers do not want to end the year with 10%, 15% or 20% cash,” said Stovall, so those investors are searching for potentially undervalued stocks that have lagged the market recently.
Indeed, bargain hunting was apparent in such groups as energy and drugs.
Wall Street sentiment also got a boost from another powerful rally in key European and Asian markets, many of which have been rocketing since mid-year as overseas interest rates have fallen.
In Frankfurt, the DAX index jumped 31.14 points, or 1.4%, to a record 2,253.98. Traders there said institutional investors want to carry their gains into 1994, so there are few sellers of stock now.
In Paris, the CAC-40 index also hit a record, up 25.07 points, or 1.1%, to 2,276.55. In London, the market was closed for a holiday, but prices there hit new highs on Thursday.
Asian markets were even hotter Monday. Singapore’s Straits Times index surged 51.65 points, or 2.2%, to a record 2,378.43. In Bangkok, the SET index leaped 43.00 points, or 2.7%, to a record 1,608.12. And in Taipei the weighted index jumped to a two-year high, up 171.30 points, or 3.2%, to 5,491.68.
Only Tokyo was a big loser. The Nikkei-225 index plunged 321.23 points, or 1.9%, to 16,819.88 as investors registered disappointment with the lack of concrete government proposals to jump-start the economy. It was the first close under 17,000 since Dec. 8.
Among U.S. market highlights:
* In what some analysts said was a sign that the hunger for overseas stocks was reaching a frenzy, shares of some closed-end single-country investment funds traded on the NYSE rocketed--far outpacing the actual gains in the underlying stocks.
The Thai Fund, for example, surged 4 1/8 to 37, a 12.5% rise. The Indonesia Fund leaped 6 1/8 to 23 5/8, Singapore Fund jumped 3 7/8 to 23 3/4 and Brazil Fund gained 1 3/4 to 20 3/4.
* Oil stocks were strong after analyst Paul Ting at the brokerage Oppenheimer upgraded five major oil companies, saying the dive in the price of oil to five-year lows has probably run its course.
Among his upgraded issues, Mobil rose 1 1/8 to 78 3/8, Royal Dutch gained 7/8 to 106 5/8, Arco jumped 1 1/2 to 105 1/4, Amerada Hess added 1 to 45 5/8 and Texaco rose 3/8 to 64 3/8.
* Drug stocks also rebounded. Merck rose 1 to 35 1/4, Pfizer zoomed 1 3/4 to 68 7/8 and American Home Products jumped 1 1/4 to 64 7/8.
Biotech giant Amgen leaped 1 3/4 to to 48 1/4 on favorable comments in Barron’s magazine.
Other health care issues were broadly lower, however. Humana lost 1 to 17 3/8, Quantum Health fell 1 3/8 to 28 1/4 and Pacificare Class A sank 2 1/2 to 37 3/4.
* Industrial stocks leading the Dow higher included GE, up 1 3/8 to 106 3/4; International Paper, up 1 1/2 to 68 1/4; Caterpillar, up 2 1/8 to 90, and GM, up 1 to 56 1/4.
* Telecom stocks, the subject of much recent profit taking, were mixed. Qualcomm fell 2 to 54 1/2 and Newbridge Networks lost 1 5/8 to 51 7/8, but IDB Communications gained 2 1/2 to 51 1/4, Dial Page surged 1 3/8 to 39 1/4 and General Instrument leaped 2 3/8 to 56 3/4.
* Telmex, the Mexican phone monopoly, rose 1 to a record 66 on the NYSE. The company said it will raise phone rates 5%. In Mexico City, the Bolsa stock index jumped 26.50 points to a record 2,593.57, continuing the stunning rally that has followed approval of the North American Free Trade Agreement in November.
Other Markets
Long-term Treasury bond yields inched up Monday in extremely light dealings as traders continued coasting into the new year.
The yield on the Treasury’s main 30-year bond rose to 6.23% from 6.21% on Thursday.
Analysts said the bond market is unlikely to make much of a move between now and Friday because many bond investors have already closed their books for the year.
Elsewhere, Arctic cold gripping the eastern half of the country drove up prices of commodities ranging from hogs to natural gas, while orange juice prices plunged after Florida’s groves were untouched by the cold.
The weather lifted sluggish demand for natural gas and heating oil used in homes and businesses, although some traders were skeptical of the steep rise in gas prices.
February natural gas futures jumped 12.4 cents to $2.088 per 1,000 cubic feet at the New York Mercantile Exchange.
“We should have been up on the (cold) weather, but the early panic was ridiculous. Technically, it was a little too much too fast,” one New York-based trader said.
Meanwhile, February crude oil prices sank to new lows, falling 35 cents to $14.13 a barrel after earlier dropping as low as $14.07. Many analysts said the cold wave is unlikely to put a dent in the glut of oil worldwide.
In orange juice futures trading, prices plunged when traders sold contracts they had bought betting that freezing temperatures would reach Florida’s groves. The bet turned out to be a bad one.
January orange juice futures lost 2.15 cents to 105.75 cents a pound at the New York Cotton Exchange.
In other markets:
* The dollar rose against the yen and other leading currencies. It hit 111.40 yen in late New York trading, up from 110.60 on Thursday.
* Gold futures added $2.10 to $389.10 an ounce on New York’s Commodity Exchange. Silver rose 6.1 cents to $5.10.
