Dow Soars 173 in 2nd-Largest Daily Advance
Blue-chip stocks posted their second-largest daily gain ever Tuesday as investors sought safety in big-name shares, while bonds rose after a solid Treasury note auction.
The dollar firmed after an important group of German economists predicted it would rally in coming months and U.S. negotiators reportedly neared a deal on the federal budget.
Broader stock indicators also rallied, but failed to keep pace with the Dow’s 173-point gain, leaving many analysts skeptical that the market’s near-term troubles are over.
The Dow Jones industrial average ended up 173.38 points, or 2.60%, at 6,833.59. The gain for the world’s most widely watched stock index was second in point terms only to the 187-point leap that took placed two days after the “Black Monday” stock market crash of Oct. 19, 1987, when the 30-stock Dow crumbled 508 points.
Advancing issues outnumbered decliners by a 3-to-2 margin on the New York Stock Exchange, where volume totaled 488.61 million shares as of 4 p.m., up sharply from Monday’s 393.65 million.
There were more declining issues than advancers in the struggling Nasdaq Stock Market, which rose 8.79 points to 1,212.74, and the Russell 2,000 list of smaller companies posted a small loss for the day.
“The quality of the rally says we’ve got some more work to do. The market is not ready to go up, up and away,” said Alfred E. Goldman, a securities analyst at A.G. Edwards & Sons of St. Louis and a noted optimist about the market’s long-term prospects.
The Standard & Poor’s 500-stock list rose 14.24 to 774.61, and the NYSE composite index rose 6.44 points to 405.84.
Despite the powerhouse performance by blue chips, analysts were wary of the mixed performance in the broader market. Indeed, buyers appeared extremely focused and largely shunned mid-sized and smaller companies.
“People are looking for companies with strong earnings and strong balance sheets,” said Alan Ackerman, market strategist at Fahnestock & Co. “Money is moving towards predictability rather than projections.”
The Dow last set a record high on March 11, with a close of 7,085.16.
Stocks spiked higher in the afternoon as interest rates fell back toward 7% in bond-market trading. Faced with a drought of new economic data, investors had been reluctant to bid aggressively, particularly after last week’s big advance.
The Treasury market rallied Tuesday after successfully absorbing $17 billion in new two-year notes from a government auction. Bonds were also helped by news reports that President Clinton and the Republican leadership of Congress may be nearing a balanced-budget agreement.
The government sold the notes at a yield of 6.46%, below the 6.476% yield forecast by bond traders.
As bond prices rose, the benchmark yield on the 30-year Treasury bond fell to 7.04% from 7.09% Monday. A week ago, the long-bond yield rose to a nine-month high of 7.17% amid mounting inflation jitters.
Among Tuesday’s highlights:
* The Dow was driven higher by Procter & Gamble, up 5 5/8 to 128 5/8; General Electric, up 4 1/8 to 108 1/2, and 3M, up 4 3/8 to 97 1/2 after the reporting strong first-quarter profit. The Dow’s only two decliners were AT&T;, down 7/8 to 32 1/8; and Philip Morris, down 1/2 to 42 1/8.
* Nasdaq was helped as networking concerns steadied. 3Com rose 13/16 to 27 3/16 after cutting prices on two key products in response to Intel’s cuts on similar equipment; Cisco Systems rose 3/16 to 47 1/2; and U.S. Robotics rose 1 13/16 to 46 7/8. Intel rose 2 1/2 to 140 7/8.
* Other companies advancing on positive quarterly results were Bristol-Myers Squibb, up 3 5/8 to 63 1/2; Chubb, up 3 3/4 to 56 1/2; Xerox, up 1 to 58 3/8.
Overseas, Tokyo’s Nikkei stock average fell slightly, Frankfurt’s DAX index fell 0.2% and London’s FTSE-100 rose 0.4%.
