FINANCIAL MARKETS : Dow Breaks Record Again; Up 37.93
For a second day, the Dow Jones industrial average surged more than 50 points amid continued expectations that the Federal Reserve Board’s policy-setting arm will lower interest rates at its Dec. 19 meeting to prolong the economic expansion into a sixth year.
“This market is going vertical,” said Bruce Simon, president of Glenmede Trust Co. of New Jersey, which oversees about $450 million in assets. “It’s now a foregone conclusion that the economy has slowed to the point where the Fed will ease.”
The Dow industrials rose 37.93 points to 5,177.45, marking the second straight close at an all-time high. The Standard & Poor’s 500-stock index gained 4.00 points to 617.68, also breaking Monday’s records. However, a decline in technology shares weakened the Nasdaq composite index, sending it down 3.90 points to 1,065.89.
“This market is continuing its bullish charge upward,” said Alfred E. Goldman, vice president at A.G. Edwards & Sons Inc. in St. Louis. “It’s hinged on the fact that we see a good economy in 1996 and good corporate earnings.”
Advancing issues led decliners by about 13 to 9 on the NYSE. Optimism that the economy will continue its expansion was supported by analysts surveyed by IBES International Inc., who expect companies in the S&P; 500 to post an average 16% increase in earnings next year, the fifth year of above-average gains.
“We’re now going through an unprecedented period of productivity and profitability for corporate America,” said John Ballen, chief equity officer at Massachusetts Financial Services Co.
Meanwhile, a barrage of weak economic figures in recent months has led many investors to believe that an easing will come by year-end.
Two retailing reports released during the session provided more evidence of soft consumer spending. Both the Johnson Redbook report and the Mitsubishi Bank/Schroder Wertheim chain stores sales index portrayed weak retail sales for the start of the Christmas season.
“The main fundamental force in this market is the possibility of the interest rate move,” said Ricky Harrington, senior vice president and technical analyst at Interstate-Johnson Lane in Charlotte, N.C.
Lower rates make stocks more attractive relative to fixed-return investments such as bonds. Lower rates would also cut corporate financing costs and thus push earnings higher.
Bonds yields, which are near two-year lows, inched up Tuesday. The 30-year T-bond yield rose to 6.04% from 6.02% on Monday.
* The Dow found much of its strength from Procter & Gamble, up 2 3/8 at 86 7/8; Merck, gaining 1 1/2 at 63 1/2; and Goodyear, ahead 1 3/8 at 44 1/2.
Among market highlights:
* Technology shares, which had fueled much of Monday’s stock rally, were mostly lower. Dell Computer fell 2 5/8 at 38 1/8, Cisco Systems dropped 3 1/8 at 82 1/2 and Microsoft was down 1 7/8 at 86.
* Rubbermaid rose 5/8 to 27 1/2 after announcing a restructuring plan and stock buyback.
* Bausch & Lomb lost 2 5/8 to 35 3/8 on its forecast that fourth-quarter earnings will fall well below Wall Street estimates.
* Acclaim Entertainment tumbled 6 7/8 to 12 5/8. The video game software developer said it is revising downward its previously reported 1995 sales and earnings.
In overseas stock markets, the Nikkei-225 average in Tokyo fell 0.1% in overnight trading and the FTSE-100 index in London was down 0.1%. Frankfurt’s DAX index rose 0.4%.
