Rally in Stocks Extended; Dow Climbs 23.92
Market Overview * Stocks ended broadly higher Monday, aided by lower market interest rates and news that defense giant Martin Marietta will buy rival Grumman.
* Long-term bond yields initially plummeted as inflation concerns eased, but rates rose later in the day in a renewed bout of bearishness.
Stocks
Analysts said the higher bond prices and correspondingly lower credit market interest rates were driving forces behind the stock market’s rally, which extended Friday’s upward movement.
The Dow Jones industrial average rose 23.92 points to 3,856.22 on Big Board volume of 285.58 million shares. In the broader market, advancing issues outnumbered declining ones about 13 to 7 on the New York Stock Exchange.
Last month, shares were battered by rising interest rates, prompted by the Federal Reserve Board’s Feb. 4 decision to tighten credit for the first time in five years. That decision kicked off a 96-point drop for blue chip issues.
Stock investors don’t like to see interest rates rise because it raises the cost of money to companies and makes shares less attractive relative to interest-bearing investments.
Stocks were also encouraged by strong share prices overseas.
Frankfurt’s DAX 30-share average closed up 48.82 points at 2,108.91; London’s Financial Times 100-share average rose 27.9 points to 3,305.9. However, Tokyo’s 225-share Nikkei average ended down 154.12 points at 19,811.88.
Mexico City’s Bolsa index rose 32.37 points to 2,601.89.
Among the market highlights:
* Grumman soared 14 1/4 to 54 1/8 on news that it plans to merge with Martin Marietta in a $1.9-billion deal. Martin Marietta gained 1 1/4 to 46.
* Northrop rose 1 3/4 to 41 3/8, E-Systems added 1 3/8 to 44 7/8 and United Technologies was up 1 to 68 5/8.
* USAir Group fell 1 1/4 to 9 after announcing a loss of $200 million in the latest quarter.
* SciMed Life rose 1 1/4 to 37 1/2 after announcing a smaller-than-expected settlement of a patent infringement suit against a Pfizer European unit.
* Unum rose 2 3/4 to 55. The company will be added to the Standard & Poor’s 500 stock index after Thursday’s close, replacing Ethyl, which fell 3/8 to 17 1/2.
Among other major market indicators, the S&P; index rose 2.17 to 466.91, while the NYSE’s composite index rose 1.37 to 259.07. The Nasdaq composite index rose 4.50 to 795.05.
Other Markets
Treasury bond prices initially surged Monday as a drop in oil and gold prices eased concerns about inflation. But the gains were eroded as investors worried about government statistics on wholesale and consumer price inflation, due out next week.
The bond market’s advance quelled last week’s speculation that the Fed might move to tighten credit again on Monday, said Lawrence Rice, chief market strategist at Josephthal Lyon & Ross.
The key 30-year bond yield fell to 6.79% from Friday’s 6.83%. Its price, which moves in the opposite direction, advanced 3/4 point in early trading, but closed up only 7/16 point, or $4.38 per $1,000 in face value.
Analysts said the market’s retreat from the first big price advance in more than a week showed how easily fixed-income investors can turn negative these days.
The worries apparently faded a bit early Monday. Bond prices opened higher after gaining ground in overseas trading, which starts earlier than the New York session.
Among other markets:
* Crude oil futures prices fell sharply on the New York Merc, after a weekend meeting of Arab oil producers ended without any agreement on cutting output to boost prices. Light, sweet crude oil for April delivery tumbled 47 cents to $14.10 a barrel--the lowest settlement for near-term deliveries since Feb. 16.
* Gold prices fell on the New York Comex to $375.90 an ounce, off $1.70 from Friday. Silver closed at $5.176 an ounce, off 6.3 cents.
* The dollar barely budged from its closing levels against major currencies last week, as traders stayed on the sidelines in the absence of any influential news. The dollar fluctuated in narrow ranges against other currencies in extremely light trading Monday.
