FINANCIAL MARKETS : Dow Hits Record Highs as Fed Board Convenes
Mounting optimism that the Federal Reserve Board will cut interest rates pushed blue-chip stocks to record highs Wednesday, although some issues in the broader market lagged.
At the close, the Dow Jones industrial average was up 30.08 points at 4,615.23, topping a record set Thursday and closing for the first time above 4,600.
In the broader market, advancing issues led decliners on the Big Board by about 4 to 3, with a moderately heavy volume of 357.87 million shares, up sharply from Monday’s 145.91 million shares. The market was closed Tuesday for Independence Day.
The best gains were concentrated in blue-chip issues, but most broad market indexes rose as well.
The Nasdaq composite added 7.29 points to 941.82, marking a new closing high. The Nasdaq also said its market capitalization passed the $1-trillion mark. Nasdaq, the nation’s second-largest stock market, has seen the market value of its stocks rise by 28% in 1995, up 2 1/2 times the $386.3-billion level at the start of 1990.
Meanwhile, the NYSE’s composite index rose 0.22 point to 293.21. The Standard & Poor’s 500-stock index rose 0.17 point at 547.26.
But the American Stock Exchange’s market value index fell 0.40 point to 501.07.
All eyes were on a two-day Fed policy meeting that convened Wednesday, in which central bankers debated whether to lower interest rates to spur the economy, or to leave them unchanged.
Investors did not expect to get news from the Fed until today. But they have bid up stock prices in the last few weeks on the hope that the Fed would ease rates.
Lower interest rates would make stocks immediately more attractive than bonds.
Stocks rose sharply in late morning after Wayne Angell, a Bear Stearns economist and former Fed governor, said he expected the Fed to ease rates by a quarter of a percentage point.
The Dow index pared a 40-point gain by more than half after the Johnson Redbook Service reported a 1.4% gain in retail sales in June.
But stocks rebounded into the close, restoring most of the Dow’s original gains. Elsewhere, Treasury bond yields retreated in light trading as bond market players also awaited the Fed’s decision.
The benchmark 30-year bond fell to 6.60% from 6.63% Monday. Its price, which moves in the opposite direction, was up 3/8 point, or $3.75 per $1,000 in face value.
Among Wednesday’s highlights:
* Economically sensitive stocks, which tend to be buoyant in a healthy economy, led the market higher. The Dow 30 components were headed by Alcoa, up 1 3/4 to 52 3/4; Goodyear Tire, up 1 3/4 to 43 1/8; Boeing, up 1 1/2 to 63 1/8; Caterpillar, up 1 5/8 to 66, and International Paper, up 1 1/2 to 88 1/4.
* Technology stocks gave up some earlier gains, with IBM down 7/8 to 96 3/4 after rising more than a point, and Microsoft down 1/4 to 90 11/16. Micron shed 1 1/2 to 52 5/8 and Advanced Micro Devices fell 7/8 to 35 3/8.
* Auto makers gained on improved sales by Chrysler and Ford. Chrysler rose 1/2 to 49, Ford gained 3/8 to 30 3/4 and General Motors added 7/8 to end at 48 3/4.
* CSF Holdings soared 6 1/2 to 37 5/8 after NationsBank said it had a definitive deal to buy CSF for $39.50 a share, or $516 million. NationsBank rose 1/2 to 54 1/2.
* Liz Claiborne rose 7/8 to 22 after a First Boston upgrade.
Overseas, stocks finished sharply higher in London, boosted by Prime Minister John Major’s leadership victory. The Financial Times 100-share average finished 45.7 points firmer at 3,394.9.
In Frankfurt, the 30-share DAX average ended off 9.24 points at 2,105.66, while Tokyo’s 225-share Nikkei average rose 74.70 points to 14,830.44. Hong Kong’s shares rose sharply on signs of warmer Sino-British relations over Hong Kong. The Hang Seng Index soared 224.80 points, or 2.45%, to close at 9,407.27.
