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Market Flexes Muscles Again; Dow Rises 24.89 to Another New High

February 22, 1986|From Times Wire Services

NEW YORK — The stock market soared to new highs Friday with its strongest showing yet this year, lifting the Dow Jones industrial average to the threshold of the 1,700 level.

Analysts said renewed declines in interest rates helped keep stock prices rising at a runaway pace.

Dow Jones's average of 30 blue chips jumped 24.89 to a record 1,697.71, bringing its gain for the week to 33.36 points. Since Jan. 22, the average has risen 195 points.

Volume on the New York Stock Exchange reached 177.59 million shares, the ninth-largest total on record, against 139.74 million on Thursday.

The market actually began the upsurge late Thursday, and the renewed buying interest spilled over into Friday's session.

Cue From Bond Market

Analysts said stock traders took their cue from declining interest rates in the bond market. The bellwether 30-year Treasury bond jumped just over 1 1/2 points, or about $15 for each $1,000 in face amount. The yield dropped to 8.71%, the lowest level since the late 1970s.

Brokers also said investors were impressed by how rapidly both the bond and stock markets bounced back from a brief setback at midweek.

There has been much talk on Wall Street that the securities markets might be due for a pause after their recent advances. But to date, any pullbacks have quickly attracted new buying.

With all the market's recent fireworks, Friday's gain was the strongest single-session showing for the Dow Jones industrial average since it rose 25.34 points last Dec. 4.

The present stage of Wall Street's bull market began last September. Since then, the Dow Jones industrial average has risen just a shade less than 400 points, or 30.8%.

Chemical Issues Strong

Among actively traded blue chips, International Business Machines gained 5/8 to 159 3/4, General Motors 1 3/8 to 80 3/8, Sears, Roebuck 3/4 to 43 5/8 and American Telephone & Telegraph 3/8 to 22 3/8.

Chemical issues were strong, benefiting along with many other stocks from falling oil prices. Dow Chemical rose 2 3/8 to 51, Celanese 6 1/2 to 199, Hercules 2 to 45 1/2 and Monsanto 1 7/8 to 59 1/2.

But bank issues ran into some selling amid uneasiness over the outlook for Mexico's debt position, which is closely linked to oil. Citicorp dropped 1 1/8 to 50 and Manufacturers Hanover 1 to 43 3/8.

KN Energy, which rejected a takeover bid by Mesa Limited Partnership, tumbled 5 1/8 to 18 1/8.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,564, compared to 2,653 on Thursday.

In the daily tally on the Big Board, advancing issues outnumbered declines by more than three to one.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 211.38 million shares.

Standard & Poor's index of 400 industrials rose 2.82 to 247.61, and S&P's 500-stock composite index was up 2.40 at 224.62.

The bond market rallied and interest rates tumbled amid optimism about the outlook for inflation and hopes for greater foreign demand for U.S. securities.

In the early going, bond prices got a lift from a Commerce Department report that showed U.S. personal income contracted 0.1% in January, marking the first decline in eight months, and representing an abrupt shift from December, when income expanded 1.2%.

The report also said consumer spending dropped 0.4% last month after a 2.1% jump in December.

Since consumer spending accounts for some two-thirds of total economic activity, it is closely monitored by analysts looking for clues to the economy's health.

Japan Influence

Weak economic news usually bolsters bond prices because slow growth tends to restrain interest rates and inflation. Bond prices generally move in the opposite direction of inflation and interest rates.

Analysts said speculation about reductions in Japanese interest rates resurfaced and aided bond prices. Rumors have been circulating intermittently that Japan is about to cut its official discount rate, a move that could drive down rates charged throughout the Japanese economy.

Japanese investors have for some time been among the heaviest foreign buyers of U.S. government and other securities. Analysts say a reduction in interest rates in Japan would scale back returns on Japanese securities, meaning returns on U.S. securities would be relatively more attractive to Japanese buyers.

In the secondary market for Treasury securities, prices of short-term governments wound up the session from 5/32 point to point higher and intermediate maturities were up 3/8 point to 1 point.

The federal funds rate--the interest on overnight loans between banks--traded at 7.563%, compared to 7.813% late Thursday.

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