Broad Indexes Post Highs as Fed Holds Interest Rates
The stock market stormed higher Wednesday as the Federal Reserve Board’s decision to keep interest rates steady lifted secondary indexes into record ground but left the Dow Jones industrial average just short of a new high.
The blue-chip Dow ended up 73.05 points at 7,795.38, which was just below its June 20 record close of 7,796.51.
Broader stock measures broke past their previous highs, with the Standard & Poor’s 500 list closing above the 900 mark for the first time.
Technology issues broke out of their recent slump, propelling the Nasdaq market up 17.36 points to a new record of 1,455.61, but smaller-company issues failed to keep pace with the blue-chip sector.
“The market got what it wanted to hear,” said William M. Lefevre, senior market analyst at Ehrenkrantz King Nussbaum. “If we were going to see some significant change today, it would have been the Fed increasing rates, which would have caused some significant damage.”
Advancing issues outnumbered decliners by nearly a 2-1 margin on the New York Stock Exchange in heavy trading. The Standard & Poor’s 500 list rose 13.00 points to 904.03. Also setting a new high was the NYSE composite index, up 5.70 points to 471.71.
The bond market also shot higher, rising for a second day after the Federal Open Market Committee, the Fed’s policymaking panel, left borrowing rates unchanged. As the price of the 30-year U.S. Treasury bond gained, its yield fell to 6.71% from 6.73% Tuesday.
Separately, the U.S. Treasury said it will sell $8 billion in five-year inflation-indexed notes July 9 in the first offering of the new securities. The sale had tentatively been set for Tuesday.
The rally in stocks was also remarkable in light of economic indicators still looming--the closely watched monthly payrolls and wage data, scheduled for release early today.
However, there was some speculation on Wall Street that the Fed’s decision to hold the line on interest rates on Wednesday foreshadowed a low-key jobs report.
“There’s no doubt in my mind the Fed has already had a look at those numbers,” said Robert Froehlich, chief investment strategist at Kemper Funds. “It probably means those numbers are going to be tame.”
Among Wednesday’s highlights:
* Among Dow components, Walt Disney fell 1 11/16 to 76 7/8 after its shares were downgraded to hold, citing concern over ratings at its ABC network.
Other big Dow gainers included Procter & Gamble, up 2 to 141 5/8; AlliedSignal, up 2 1/8 to 86 5/16; and Alcoa, up 1 7/8 to 78 1/4.
* Predictably, the added certainty about steady interest rates lifted financial services issues. Citicorp jumped 4 3/4 to 128 1/16, and Travelers Group rose 2 1/8 to 66 7/8 as one of the Dow’s strongest components. Also advancing were Bank of New York, up 2 1/16 to 46 3/4, and Norwest, up 1 1/8 to 58 1/8.
* Nasdaq’s surge was powered by computer networking and semiconductor issues. Ascend Communications surged 5 5/16 to 49 1/16; 3Com advanced 3 11/16 to 48 1/8; and Cisco Systems rose 2 1/4 to 70 9/16.
The biggest tech-related gainer was Peritus Software Services, jumping 10 3/4 to 26 3/4 in its first day of trading.
* In other individual issues, Pennzoil fell 15/16 to 74 7/16 after rejecting a hostile $84-per-share takeover bid from Union Pacific Resources Group, which fell 1/16 to 24 15/16.
