FINANCIAL MARKETS : Dow Soars 58 as Economic Reports Ease Inflation Fears : Markets: The index comes within 50 points of the 4,000 level, its highest closing in 7 months. Bonds also gain.
Fading inflation fears propelled stocks to their third straight gain Thursday, lifting the Dow Jones industrials to within 50 points of the unprecedented 4,000 level once again.
The benchmark average of 30 industrial stocks jumped 58.55 points to 3,953.88, its highest level in seven months and fewer than 25 points shy of its record high of 3,978.36, set Jan. 31. The increase was the largest since Aug. 24, when the industrial average jumped 70.9 points. In the last three sessions, the average has risen nearly 94 points.
Broader market indexes also advanced, as overall gainers led losers by more than 2 to 1 on the New York Stock Exchange. Big Board volume totaled a moderate 281.16 million shares, down from 297.44 million Wednesday.
Investors bid up prices after determining that economic reports released Thursday continued to signal moderate U.S. inflation, which they hope will keep the Federal Reserve Board from raising interest rates a sixth time this year, traders said.
The reports also sparked gains in the bond market. The Treasury’s bellwether 30-year bond rose nearly $5 for every $1,000 in face value, and its yield dropped to 7.63% from 7.67% on Wednesday. Bond prices and yields move in opposite directions.
The reports included one from the Federal Reserve Bank of Philadelphia saying that Northeast factories were expanding production but at a weak pace. A second report, from the Commerce Department, showed business stockpiles expanding only moderately in July.
Stocks got a second boost late in the session from a flurry of computerized program trades, which analysts noted were made just ahead of today’s “triple witching” session, in which certain stock and index options and index futures will expire.
Despite the Dow Jones industrials’ latest advance toward 4,000, analysts noted that many of the market’s barometers--and many of the public’s mutual funds, for that matter--are barely ahead for the year.
Judging by those results, Wall Street is just now getting back to where it was when 1994 began--before the Fed launched the first of its aggressive moves lifting interest rates.
The Standard & Poor’s 500 composite index, for instance, rose 6.01 on Thursday to 474.81, leaving it with a paltry 1.9% gain for the year so far. The Nasdaq composite index, by surging 10.05 to 778.66, is now ahead a mere 0.2% for 1994.
And some analysts cautioned that the market, for the next few weeks at least, will probably continue to be buffeted by investors’ rapidly changing sentiments about the economy’s outlook.
“You see some strong growth numbers, then weak growth numbers . . . so you have this tug and pull on the markets,” said William H. Gross, managing director of Pacific Investment Management Co. in Newport Beach.
“There probably will be no definable trend, in terms of a significant bull or bear market, until we have a little more idea of where the economy is headed,” he said.
Michael Murphy, a Wall Street bear who publishes the Overpriced Stock Service newsletter in Half Moon Bay, Calif., said he concurs with many investors who do not expect the Fed to raise interest rates again this year.
But he also asserted that “inflation is back, at least at the wholesale level,” and that as those price gains move into the retail sector in coming months, “we’re not going to get better consumer price index numbers than we’re seeing” now.
At that point, even if the central bank does not tighten credit further, “corporate profit margins will get squeezed,” Murphy said.
On Thursday, earnings reports again dictated wide swings for several stocks. Auto parts maker Federal-Mogul fell 3/4 to 24 after saying late Wednesday that it expected its profit to trail analysts’ forecasts, but electronics supplier Tektronix leaped 4 to 38 1/4 on a strong quarterly earnings report.
Among the blue chips, General Motors climbed 1 3/8 to 51 5/8, AT&T; rose 7/8 to 55 1/8, General Electric gained 1 1/8 to 51 3/8 and Merck edged up 1/2 to 34 1/4.
High-technology gainers included Texas Instruments, up 2 1/2 at 78; Hewlett-Packard, up 1 to 91 3/8, and Compaq Computer, up 1 1/2 to 37 3/8.
Structural Dynamics Research sank 2 3/4 to 4 7/8 in Nasdaq trading after the maker of computer-aided engineering gear said it would restate its financial results for the last 2 1/2 years. Analysts said Structural Dynamics’ problems will boost the fortunes of rival Parametric Technology, which shot up 3 15/16 to 31 1/2.
In overseas trading, London stocks finished sharply higher after seven consecutive days of declines. The FTSE-100 average closed 32.9 points higher at 3,112.7. Frankfurt’s DAX 30-share average fell 10.14 points to 2,113.98. The Tokyo stock market was closed for a national holiday. Mexico City’s Bolsa index also reached its highest level in seven months, gaining 61.49 to 2,804.64.
* 2 POSITIVE REPORTS
Philadelphia Fed, Commerce Dept. paint a faintly rosy economic scene. D2
