FINANCIAL MARKETS : Dow Rallies 34 Points on Prospect of Stable Interest Rates, Higher Stock Prices
Stocks shot up Wednesday after two down days, as the prospect of stable interest rates helped spark a year-end rally.
The Dow Jones industrial average, which gained as much as 50 points before easing off the day’s high, closed up 34.65 points at 3,801.80, nearly erasing a 40-point drop that occurred over the previous two sessions.
In the broad market, advancing issues outnumbered decliners by about 8 to 5 on hefty New York Stock Exchange volume totaling 380.56 million shares, up from 325.53 million Tuesday.
Broad market indexes also moved higher with the Nasdaq composite index of mostly smaller issues soaring 8.61 points to 737.12. The NYSE’s composite index gained 1.14 points to 250.94, and the Standard & Poor’s 500-stock index added 2.51 points to 459.61. The American Stock Exchange’s market value index climbed 2.63 to 427.93.
Investors were relieved that the Federal Reserve Board did not raise interest rates at its monthly policy meeting on Tuesday. Also, many were buying stocks in anticipation that prices would strengthen as the year draws to a close.
“The Fed’s out of our face, there are favorable seasonalities, and so the market is doing a little bit better,” said Larry Wachtel, market analyst at Prudential Securities. “I’m not saying it’s a brave new world, but . . . the alarm is out of the market.”
In the bond market meanwhile, Treasury bond ended little changed in light pre-holiday trading marked only by a well-bid auction of short-term notes and the presence of buyers fleeing Mexican assets.
The Treasury’s main 30-year bond yield was unchanged at 7.84%.
On Wall Street, traders and analysts said stocks were also recovering from profit-taking after last week’s strong gains, which many concluded was a technical rally tied to triple options and futures expirations.
Added James Solloway, research director at Argus Research Corp.: “There’s a positive bias in the market between now and the end of January, as tax-related selling disappears and investors take a closer look at the real values that currently exist in the market.
Among the market’s highlights:
* Teledyne surged 3 5/8 to 20 3/4 on news that WHX Corp. was filing documents to allow it to acquire up to 15% of Teledyne’s outstanding shares. WHX ended flat at 14 1/8.
The American depositary shares of Mexican companies took a beating for the second consecutive session, following Tuesday’s devaluation of the peso and political tensions in Chiapas.
* Telefonos de Mexico, the bellwether Mexican stock, fell 1 to 45. Grupo Tribasa dropped 2 1/8 to 22 3/8, while Empresas ICA lost 7/8 to 23 1/8.
* Technology stocks, which many traders and analysts believe have taken a leadership position in the market, were higher. IBM gained 2 7/8 to 73 5/8, after Merrill Lynch raised its 1994 earnings estimates for the company. Compaq rose 1 1/2 to 39 3/8.
* Intel was the most active issue in Nasdaq trading and rose 1 3/8 to 62 5/8. Bowing to consumer criticism, the company on Tuesday offered to replace its flawed Pentium microchips.
* Oracle Corp. gained 3 to 42 3/8 on strong earnings.
* Marvel Entertainment Group dropped 1 5/8 to 14 1/4. It said 1994 earnings would be below Wall Street forecasts.
* Drug shares benefited from a new provision in international trade law that extends the patent on some drugs, protecting name-brand companies from generic drug competition. Bristol-Myers Squibb rose 1 1/4 to 60 5/8, while Merck rose 1/2 to 39 1/8. Abbott Labs added 15/16 to 33 5/16. Mylan Labs gained 1/2 to 26 1/2.
* Alcoa rose 2 1/8 to 82 7/8 after it said it expects an after-tax gain in the fourth quarter of $3.30 per share, before an expected stock split. Alcoa also said it agreed with Western Mining to combine their bauxite-alumina inorganic chemicals interests into a worldwide enterprise.
Overseas stock markets were mixed. Tokyo’s 225-share Nikkei average closed down 66.31 points at 19,340.67. In Frankfurt, the DAX average finished at 2,086.66, up 6.73 points, and London’s key Financial Times 100-share average gained 12.3 points to 3,070.4.
In foreign exchange trading, a round of speculative dollar buying against European currencies jolted the foreign-exchange market out of pre-holiday sluggishness Wednesday, pushing the U.S. currency higher.
In New York trading, the British pound was quoted at $1.545, the lowest level since early September, down from $1.560 late Tuesday. The dollar also closed at 1.579 German marks, up from 1.571, and at 100.48 Japanese yen, up from 100.17.
