SURGING MARKETS : Dow Beats 4,700 as Stocks Soar on Optimism About Economy : Wall Street: Nasdaq trading volume tops 500 million for the first time. But bond yields inch higher.
U.S. and foreign stocks keyed off Thursday’s interest rate cut by the Federal Reserve Board to rally mightily Friday, betting on sustained economic growth.
Despite a modest rebound in long-term bond yields after a stronger-than-expected June employment report, a flood of buy orders in the stock market boosted trading volume to record levels on Nasdaq and made for one of the Big Board’s busiest days ever.
The Dow Jones industrial average soared 38.73 points to a record 4,702.73, the first close over 4,700--only two days after 4,600 was breached.
“It’s up, up and away,” said Jack Baker, head trader at Furman Selz Inc. in New York. “Anybody who’s been too bearish has been taken to the morgue.”
The rally was a global affair, helped partly by news of lower interest rates in Japan as well. Tokyo’s downbeaten Nikkei-225 stock index soared 956.19 points, or 6.3%, to 16,213.08, the highest close since May 18.
In Paris, the key stock index jumped 3.3%, in Buenos Aires shares rose 3.8%, and in Seoul they gained 3%.
On Wall Street, winners swamped losers by more than 2 to 1 on the New York Stock Exchange on volume of 467 million shares, the fourth-busiest day ever.
And in the Nasdaq market of mostly smaller stocks, trading volume hit 512 million shares, marking the first 500-million-plus day.
Another frenzied round of buying in technology stocks drove Nasdaq activity, sending the market’s composite stock index up 16.83 points, or 1.8%, to a record 969.76, the biggest one-day point gain since April 5, 1994.
Analysts said investors’ bullishness reflects expectations that the Fed’s quarter-point cut in short-term rates Thursday signals an easier-money policy that should keep the U.S. and world economies advancing well into 1996--despite a recent slowdown.
Investors appeared to be further cheered Friday after the government reported surprising strength in the June employment report.
“Combined with the Fed’s action, it indicates that the economy really isn’t in trouble,” said Michael Metz, investment strategist at Oppenheimer & Co. “There’s a slowdown but not likely a recession.”
But the bond market, which had rallied Thursday after the Fed cut short-term rates, suffered indigestion after the strong employment report. Yields jumped initially, then fell back, though they still closed up from Thursday. The 30-year Treasury bond ended at 6.52%, up from 6.49% on Thursday.
Among Friday’s highlights:
* Industrial issues rising with optimism about the economy included Monsanto, up 2 1/2 to 94 3/4; Caterpillar, up 2 5/8 to 71; Inco, up 2 3/8 to 32 1/4; Inland Steel, up 2 3/8 to 34 7/8; Emerson Electric, up 2 5/8 to 75 1/4, and GE, up 1 to 60.
* Technology stocks also soared anew. Intel jumped 2 13/16 to 68 1/4, Microsoft zoomed 2 7/8 to 95 5/8, Seagate leaped 2 to 42 1/2 and Broderbund rose 3 3/4 to 66 1/2.
IBM closed up 5/8 to 99 1/2 after trading above 100 for the first time since July, 1992.
* Among transport issues, CSX soared 3 3/8 to 81 3/8, Conrail rose 3 1/4 to 61 1/8 and UAL added 2 3/8 to 145.
* On the downside, weakness in consumer growth stocks limited the gains in blue-chip indexes like the S&P; 500. Some investors sold consumer stocks to focus on industrial names. Among the losers, Gillette fell 2 1/4 to 42 7/8, Merck lost 1 1/8 to 47 5/8 and McDonald’s fell 1 to 37 5/8.
Market Roundup, D3
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Selected Interest Rates
Corporate AAA bonds: 7.34%
90-day CDs: 5.92%
3-month Treasury bills: 5.49%
Bank prime rate: 8.75%
Municipal bonds: 5.97%
Federal funds rate: 5.75%
Discount rate: 5.25%
