Stock Prices on Year-End Ride; Dow at New High
Market Overview * The record breaking on Wall Street accelerated Tuesday, with three major indexes reaching new highs and stocks gaining broadly.
* Treasury bond prices bounced around in a sparsely traded session, weakened by a report of rising consumer confidence but strengthened later by news of weak retail sales.
Stocks
The Dow Jones industrial average closed at its second record high in a row, up 0.84 point to 3,793.77.
The Standard & Poor’s 500-stock index also hit its second record in as many days, rising 0.40 to 470.94. The NYSE composite gained 0.44 to 260.51, also a new high. The previous NYSE record was 260.48 on Oct. 15. The Nasdaq composite index gained 3.50 to 764.56.
However, analysts cautioned against attributing the gains to anything more than customary year-end buying combined with continued optimism for a growing economy with low inflation.
“I don’t think there’s a lot of new news,” said William Dodge, chief investment strategist with Dean Witter, Discover & Co. in New York. “The market is doing its year-end thing.”
Stocks usually rise at year’s end, as most of the sellers finish their trading for the year earlier in December.
Positive economic reports on consumer confidence and the outlook for industry momentarily depressed bond prices Tuesday morning, and that helped to send stocks lower. Bonds recovered somewhat, however, and stocks followed.
The first report showed the Conference Board consumer confidence index jumping well above Wall Street predictions. And the Commerce Department said U.S. industry in 1994 should enjoy the fastest growth in six years, driven by sales of computers and machinery to businesses and of autos and homes.
“I think the market is of the opinion, and rightly so, that the economy will grow moderately in 1994--2.5% to 3%--inflation will be well contained, interest rates will be stable to lower and profits will grow 10% or so, which is a sweet set of circumstances for stocks,” said Steven Einhorn of Goldman, Sachs & Co. in New York.
The analysts said it was encouraging to see that broader market indexes have joined the relatively narrow Dow in record territory.
But, Dean Witter’s Dodge said it remains to be seen whether the gains can be sustained.
“We will have to see more unemployment reports, the sustainability of consumer spending and whether housing can gain with higher interest rates. “That will take a couple of more months to get settled,” he said.
Dodge and Einhorn were both encouraged by recent strength in bank and financial stocks, saying this is important for others to succeed as well. Those sectors, however, were mixed to lower Tuesday.
Among the market highlights:
* Investors bought cyclical stocks that could do well in an improving economy.
“The cyclicals seem to be the target over the last couple of days,” said Alice Sadlo, first vice president at McDonald and Co.
Among blue-chips, Alcoa rose 1 1/8 to 69 3/4; Caterpillar inched up 3/8 to 90 3/8; General Motors rose 1/2 to 56 3/4.
* Retail issues were mixed in active trading as investors took stock of the holiday shopping season, which some analysts said fell short of expectations. Limited dropped 1/8 to 16 3/4; Nordstrom fell 1 to 32 3/4; J.C. Penney gained 1/4 to 54 3/4 and Federated Department Stores rose 1/2 to 20 7/8.
* Computer chip makers gained on news that the United States ordered emergency talks with Japan after that country announced another drop in the market share of foreign chips. Intel was up 1 3/4 to 64 1/2; Motorola gained 1/2 to 91 7/8 and Texas Instruments rose 1/2 to 63 1/8.
Other technology issues also gained. Microsoft was up 2 1/4 to 82 3/4; Compaq Computer rose 1 3/4 to 75 1/4.
* Transportation issues, which are influenced by the overall economy, were also strong. Southwest Airlines gained 1 to 36 7/8; Container shipper American President Cos. was up 1 1/4 to 56 5/8.
* Tiffany lost 4 1/4 to 31 7/8 after the luxury goods retailer reported slower-than-expected sales during November and December.
* QVC Network lost 1 5/8 to 37 7/8. The company it is seeking to acquire, Paramount Communications, was off 3/4 to 77 3/8.
Overseas, European markets cooled off from recent hefty gains. In Frankfurt, the DAX 30-share index closed down 11.16 at 2,242.82. In Paris, the CAC 40-share index ended down 11.91 at 2,264.64. The London stock market was closed for an extended holiday.
In Tokyo, the Nikkei average closed at 17,131.21, up 311.33, while in Hong Kong, the blue-chip Hang Seng index made its biggest one-day jump ever as foreign funds poured into the market. The index finished up 530.38 points, or 4.80%, to a new record of 11,570.22.
Credit
The yield of the Treasury’s main 30-year bond held steady at 6.23%. Its price fell 1/16 point, or 63 cents per $1,000 in face value. Yields on shorter-term maturities were mostly lower.
Traders said a holiday calm prevailed throughout the bond market. Volume was light as many participants were on vacation and some large firms had closed their books for the year.
Against that backdrop, the consumer confidence report initially depressed the Treasury’s 30-year issue. The report was seen as a signal of economic growth that could mean renewed inflation, which erodes the value of fixed-income investments.
The market later recovered when a widely followed report on retail sales, the Johnson Redbook report, showed December retail sales declined from the month earlier. Such a report indicates economic weakness and tends to support bond prices.
“That brought some renewed buyer interest into a thin market,” said William V. Sullivan, director of money market research at Dean Witter, Discover & Co.
Market Roundup, D6
