Dow Rises for Third Straight Day
Stocks gained for the third day in a row Thursday as share prices continued their glue-like attachment to bonds.
Buyers returned as interest rates retreated after Fed Chairman Alan Greenspan expressed no inflation worries and did not refer to rates in a speech to a banker group.
Shares also rose despite another round of statistics showing strong economic growth. Such numbers have in recent weeks spurred fears in the stock and bond markets of higher interest rates and inflation.
These fears have been at the heart of the recent selloff in both markets, so the lack of a decline Thursday led analysts to express hope that the worst may be over.
The Dow Jones industrial gained 13.53 points to close at 3,693.26. Rising issues outpaced losers by a 9-to-5 margin on the New York Stock Exchange.
Since Tuesday, the blue chip index has gained nearly 100 points after plummeting more than 200 points in six out of seven previous trading sessions in a massive wave of selling sparked by rising interest rates.
In the bond market, the Treasury’s key 30-year bond yield fell to 7.20% from the previous day’s 7.24%. Its price, which moves in the opposite direction, rose 3/8 point, or $3.75 per $1,000 in face value.
Stock investors have moved in lock-step with bonds, fearing high rates will prompt an exodus from stocks into safer, interest-bearing investments such as CDs.
Speaking in San Francisco, Greenspan focused on the negative consumer outlook despite the economy’s healthy long-term outlook.
The tone of Greenspan’s remarks convinced economists that the Fed was unlikely to ratchet up rates again soon, after tightening credit twice since Feb. 4.
“To the extent that you don’t get someone like Greenspan beating you on the head, I think people are willing to step up and buy into the stocks,” said Tom Kirkenmeier, vice president with Northern Trust.
Also providing fresh support for the bond market’s advance was buying from individual investors, fund managers and other players who until recently had shied away from the shaky market, financial analysts said.
In the positive economic news, the Commerce Department reported that American businesses plan to increase investments in new building and equipment by 8% this year on top of last year’s 7.1% rise. This would be the biggest jump in capital investment since an 11.4% increase in 1989.
Many major retailers on Thursday reported double-digit sales gains in March, thanks in part to pre-Easter spending. On Wednesday, auto makers also reported a healthy March, with Detroit’s Big Three all saying they sold at least 10% more cars than the year-earlier period.
Broader market indexes also closed higher. The Standard & Poor’s 500 stock index posted a gain 2.83 to 450.88, while the Nasdaq index of mostly smaller stocks gained 4.45 to 755.17. Big Board volume retreated to 289.28 million shares, from Wednesday’s 302 million.
Among the market highlights:
* Cyclical stocks, such as paper, raw materials and heavy machinery, which rise and fall with expectations for the economy, started weak, but also gained through the day. DuPont was up 1 1/8 to 55 1/4, but International Paper was down 1 to 66 1/8. If there is renewed inflation and higher interest rates, investors in these cyclical stocks fear the economic recovery would be hampered enough to hurt profits.
* Bank stocks benefited from lower bond yields, which decrease their cost of borrowing. Chemical Bank gained 1 5/8 to 38.
* Several computer stocks helped push up the Nasdaq index. Sun Microsystems, which reported strong quarterly earnings Wednesday, gained 3 1/8 to 25 3/8.
* Many retailing stocks rallied on the heels of strong same-store figures for March. Federated Department Stores rose 7/8 to 23 7/8, Dayton Hudson rose 1 5/8 to 78 3/4 and The Gap added 2 1/4 to 49.
* But Tandy Corp. collapsed 3 5/8 to 32 1/2 on disappointing sales in March by the nation’s largest consumer electronics retailer.
* Seat cover-maker Lear Group rose to 18 1/8 from its 15 1/2 initial public offering price.
Molecular Dynamics fell 3 7/8 to 6 1/8 after it said it expected a large first quarter loss and a drop in sales.
Stocks closed higher again in overseas trading. Tokyo’s Nikkei 225-share average closed up 194.24 points at 19,890.98. In Frankfurt, the DAX index ended 10.21 points higher on the day at 2,201.41, while in London, the Financial Times 100-share average closed down 2.5 points at 3,129.0.
Mexico City’s Bolsa index ended 12.81 points higher at 2,273.33. Hong Kong’s Hang Seng index closed up 51.61 points at 9,285.92.
In other markets, gold fell $1 to $384.90 an ounce and silver retreated 5.2 cents to $4.446 an ounce on the New York Comex. The dollar finished narrowly mixed.
Market Roundup, D6
