FINANCIAL MARKETS : Stocks Hit Record Highs; Dollar Gains
Blue-chip stocks soared to another new high Tuesday as investors bet that there is still life in Wall Street’s record-setting rally.
At the same time, the dollar rose on expectations that the Federal Reserve Board will again intervene to support the ailing currency. Treasury bond yields dipped as a government report showing a decline in construction spending strengthened the growing belief that the economy is slowing and that inflation is therefore under control.
The Dow Jones industrial average soared 33.20 points to 4,201.61, easily besting its previous high of 4,172.56, reached Thursday.
Broader stock market measures also advanced. The New York Stock Exchange composite index rose 1.80 points to 273.29, and the Standard & Poor’s 500-stock index gained 3.39 points to 505.24. Both climbed past their previous highs, set March 28, of 271.92 and 503.90, respectively.
The records came despite a dismal performance by technology stocks, which dragged down the Nasdaq composite index. That measure sagged 4.33 points to 813.72 as a marked setback for Sybase depressed the technology sector.
Market analysts offered numerous explanations for stocks’ strength.
“I think it mainly reflects the increasing conviction that we are going to have a soft landing” in the economy, said Michael Metz, an Oppenheimer & Co. vice president. That is, investors have become confident that moderating economic activity will not result in a recession.
The dollar recovered from its record low against the Japanese yen in Asian dealings. Analysts said the U.S. currency was supported by purchases in U.S. trading that followed the Fed’s massive dollar buying on Monday.
News from the Commerce Department on Tuesday reinforced the optimism. Its report said construction spending fell 0.5% in February after having fallen 0.5% in January, marking the first such back-to-back monthly declines in a year. Although non-residential outlays jumped to their highest level in more than four years, they were unable to offset the declines in home building (which is sensitive to interest rate changes) and government projects.
In New York, the dollar closed at 86.21 Japanese yen, up from 86.13 on Monday. The dollar was also quoted at 1.379 German marks, up from 1.373.
Repeated attempts by the Clinton Administration to support the U.S. currency through purchases of dollars on the open market have failed. Some economists have speculated that because intervention has not succeeded, the United States may need to raise interest rates to prop up the currency.
So far, however, the prospect of higher rates prompted by a weaker dollar has not deterred stock buyers much if at all.
The Treasury’s main 30-year bond yield closed at 7.37%, down from 7.39% on Monday. Its price rose 7.32 point, or $2.19 per $1,000 in face value. Prices and yields move in opposite directions.
In other overall market statistics, gainers outnumbered losers by about 12 to 7 on the NYSE.
The Big Board total came to 330.58 million shares, up from 296.43 million on Monday.
At the American Stock Exchange, the market value index increased 1.31 points to 467.30.
Among Tuesday’s highlights:
* Sybase plunged 16 1/8, or 41%, to $23 on a massive volume of more than 32.1 million shares, representing nearly half the company’s 68 million shares outstanding.
* Leading the rise in the Dow index were stocks with a strong multinational presence. International Paper gained 1 to 75 7/8, Procter & Gamble added 1 5/8 to 67 5/8 and McDonald’s tacked on 7/8 to 34 7/8.
* Auto stocks suffered after lower March sales were reported. General Motors fell 1 1/8 to 43 1/2, Chrysler shed 2 1/8 to 40 and Ford Motor dropped 1/2 to 26 5/8.
* Timberland tumbled 3 3/8 to 22 3/4 after saying its results for the first and second quarters of 1995 will be significantly below Wall Street expectations.
* Airline stocks rose on expectations of strong March traffic figures. United Airlines parent UAL jumped 2 1/2 to 107, and Delta Air Lines gained 1 5/8 to 63 5/8.
* Moorco International rose 7 3/4 to 21 3/8 after the manufacturer of industrial measurement and control devices received an unsolicited bid of $223 million from FMC Corp. FMC fell 1/4 to 60 3/4.
* Host Marriott fell 5/8 to 10 7/8 on news that the company’s chief executive is resigning to become the chief financial officer of Walt Disney Co.
Overseas markets closed higher. Tokyo stocks staged a technical rally, and the Nikkei-225 average closed up 249.24 points at 15,630.53. London’s FTSE-100 average climbed 45 points, or 1.43%, to 3,188.1, and Germany’s 30-share DAX average closed up 34.19 points at 1,965.01.
In Mexico, late profit taking stripped away heavy earlier gains, leaving the Bolsa index 17.22 points lower at 1,905.95. It had earlier risen as high as 1,984.09 on a spate of foreign buying.
In commodities trading, platinum futures prices vaulted to a 4 1/2-year high as investor demand strengthened.
