Dow Makes a Dash for 4,000 Level : Markets: Hope for economic expansion without inflation pushes the index to a record closing mark of 3,986.17.
Stocks climbed to record highs Wednesday, with the Dow Jones industrial average closing within a few points of the long-sought 4,000 level amid mounting belief that the economy can expand steadily without inflation.
The widely watched Dow closed 27.92 points higher at 3,986.17, shattering the record 3,978.36 set Jan. 31, 1994. Earlier in the session, it had risen to 3,997.95.
Standard & Poor’s 500 index rose 1.99 points to 484.54, topping Tuesday’s record high of 482.55 and indicating broad market strength.
The rally began in earnest after the Federal Reserve Board reported a downturn in manufacturing activity. The Fed said industrial production climbed 0.4% last month, after rising at a revised rate of 0.9% in December.
The figures gave analysts hope that inflation is waning and that the Fed will find it unnecessary to further tighten short-term interest rates.
“There is increasing confidence that we’ve passed the peak of monetary tightness,” said Michael Metz, market strategist at Oppenheimer & Co., and “that there will be a slowdown in the economy, but it won’t be lethal.”
The Labor Department said consumer prices jumped 0.3% in January, about as much as had been expected. The markets shrugged off a potentially disturbing 0.4% rise in core consumer inflation. They also largely ignored a report that factories were operating at 85.5% of capacity in January, up 0.1% and closer to peak capacity.
But stock investors chose to focus on the dip in manufacturing production, said Hugh Johnson, market strategist at First Albany Corp.
“The message of the markets is we’re headed toward a perfect world,” Johnson said. “We may have a bout of inflation in three to six months, but if the economy continues to slow, then we will have a soft landing.”
Since a report of worsening unemployment earlier this month , an increasing number of analysts have suggested that the Fed may have succeeded in engineering a “soft landing,” or moderate growth rate with low inflation.
Wednesday’s rally was intensified by several waves of computerized “buy” orders and purchases designed to reverse short positions, or bets that the market will fall. Traders said it was also helped by trading activity tied to Friday’s double options expirations.
“Once we got through 3,976 on the Dow and the previous all-time high on (Standard & Poor’s), it just took off,” said Bob Walberg, market analyst at MMS International in Chicago. “People who were sitting on the fence . . . are now jumping in on the ‘buy’ side.”
In the broader market, advancing issues held a lead of nearly 2 to 1 on the New York Stock Exchange. Big Board volume was heavy at 378.86 million shares, up from 300.71 million on Tuesday.
The NYSE’s composite index rose 1.06 points to 263.19. The Nasdaq composite index climbed 5.01 points to 795.63. The American Stock Exchange’s market value index rose 1.86 points to 449.35.
Investors bought a wide variety of stocks, pushing up economically sensitive, financially sensitive and technology names. Auto stocks were prominent gainers.
Bonds, a sensitive barometer of inflation anxiety, ended higher in a topsy-turvy session driven by conflicting views of the economy’s condition and of whether the Fed will raise interest rates again soon.
The session pushed the yield on the Treasury’s long bond to a new five-month low of 7.56%, from 7.59% on Tuesday. The bond’s price, which rises when the yield falls, rose 13/32 point, or $4.06 per $1,000 invested.
Bonds yields moved higher early in the day, after the Labor Department released its consumer prices report. The increase was near expectations but was viewed as bearish by the bond market because it suggests inflation may still be a problem.
Yields retreated later in the day after the Fed issued a statement saying there was a “widespread” slowdown in manufacturing in January. The statement accompanied the Fed’s report on industrial production for last month.
Among Wednesday’s highlights.
* Ford was unchanged at 26 1/8, but General Motors rose 1 to 41 1/2 and Chrysler advanced 5/8 to 46 3/8.
* International Paper gained 1 1/8 to 77 7/8; Aluminum Co. of America added 7/8 to 81 3/4; Conrail rolled up 2 to 56 1/4.
* Microsoft fell 1 1/8 to 60 3/4 after a federal judge rejected a government antitrust settlement with the software powerhouse. Shares in Intuit fell 3 to 65 1/2 on concern that the court ruling could block Microsoft’s plan to acquire it.
* Piper Jaffray rose 1 5/8 to 12 3/4 after the brokerage said it would pay investors $70 million to settle a lawsuit alleging misrepresentation of a bond fund. The amount was less than had been expected.
* Wellpoint Health Networks rose 3 7/8 to 32 1/2. The health care services company said it is reviewing takeover proposals from at least three firms, including Kohlberg, Kravis Roberts & Co.
Market Roundup, D6
* SLOWER ECONOMY: Consumer prices jumped but output growth slowed. D3
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Consumer Price Index
Percent change from previous month, seasonally adjusted: January, 1995: 0.3%
Source: Labor Department
Interest Rates:
30-year T-Bond: 7.56%
1-year T-Bill: 6.63%
* SLOWER ECONOMY: Consumer prices jumped but output growth slowed. D3
