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Dow Surges 25.25 to Record High as Trading Picks Up

May 29, 1986|From Times Wire Services

NEW YORK — Stock prices surged Wednesday, breaking record highs that had stood for several weeks as Wall Street's bull market continued its recent revival.

The Dow Jones average of 30 industrials climbed 25.25 to 1,878.28, easily surpassing the previous closing peak of 1,855.90 that it reached April 21. In the last four sessions, the average has gained 103.11 points.

Indexes of the New York and American stock exchanges and the over-the-counter market also hit new highs, and trading picked up from its recent sluggish pace.

Volume on the New York Stock Exchange came to 159.59 million shares, up from 121.16 million Tuesday and the heaviest total in more than a month.

Analysts say the revival of the bull market in recent days has been spurred by a spreading belief that interest rates still have room to decline.

Expects Further Cuts

Henry Kaufman, economist at Salomon Bros., said Wednesday that he expected the Federal Reserve to stick with an expansionary monetary policy at least until late 1986.

Speaking at a bankers' meeting in Lugano, Switzerland, Kaufman said he believed that a new round of discount rate reductions in Japan, West Germany and the United States was possible next month.

Stocks got a further boost from word of share repurchases by two companies that are components of the Dow Jones industrial average.

International Business Machines said late Tuesday that it would buy back up to 10 million shares on the belief that the stock was attractive at recent price levels. On Wednesday, Philip Morris reported plans to buy back up to 2 million of its shares.

IBM stock gained 4 3/8 to 151 3/8 and led the NYSE active list on turnover of more than 3.7 million shares. Philip Morris rose 1 to 68 1/2.

Celanese picked up 7 to 222 on word that directors had authorized the company to buy back as many as 600,000 of its shares.

Brokers said it came as a big psychological plus for the market that officials of such major corporations regarded stocks as good buys despite their sharp run-up since last September.

Among other blue chips, American Express rose 1 3/8 to 63, RJR Nabisco rose 1 1/8 to 48, General Motors climbed 2 1/8 to 80 1/2 and American Telephone & Telegraph rose 1/8 to 25 1/8.

Sperry added 3/8 to 74 5/8, but Burroughs was down 7/8 at 58 5/8. The two companies reached a definitive merger agreement.

Stocks of large retailers, which have been widely described as big potential beneficiaries of the tax-overhaul plan now pending in the Senate, generally were strong. J. C. Penney rose 2 5/8 to 83, Associated Dry Goods rose 1 3/4 to 49 5/8 and K mart rose 1/2 to 52.

Advancing issues held a three-to-two edge on declines on the Big Board. The exchange's composite index gained 1.01 to 141.72.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,994, compared to 2,240 on Tuesday.

Other Indicators

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 189.46 million shares.

Standard & Poor's index of 400 industrials rose 2.28 to 275.55, and S&P's 500-stock composite index was up 1.88 at 246.63.

The Wilshire index of 5,000 equities closed at 2,540.120, up 18.046.

The NASDAQ composite index for the over-the-counter market advanced 2.27 to 397.16.

At the American Stock Exchange, the market-value index closed at 280.85, up 0.97.

In the bond market, prices dropped despite gathering optimism for more declines in interest rates, which rallied the stock market.

The Treasury Department's key 30-year bond fell $10 for each $1,000 in face amount, and its yield rose to 7.48% from 7.40% late Tuesday.

Analysts said bond prices were depressed partly because of an early selloff in Tokyo by Japanese investors, who are important buyers of U.S. securities.

Bond Market 'Tired'

"The market was tired. It had rallied for a few days," said Jay Goldinger, an economist at the investment banking firm of Cantor, Fitzgerald & Co. in Beverly Hills.

Several analysts said investors were awaiting the release of economic figures from Washington before making any moves. The Commerce Department was scheduled to release its leading indicator statistics today.

"The market feels nervous," said Robert J. Genetski, economist at Harris Bank in Chicago. "There's a great deal of uncertainty about where the economy is going."

However, there is a growing view that economic sluggishness will compel the Federal Reserve Board to pressure interest rates lower during the summer in order to stimulate growth.

Many economists predict that the Fed will reduce the discount rate, the loan fee charged to banks, by half a percentage point to 6%, in what would be the third reduction of that rate this year.

Secondary Market

In the secondary market for Treasury bonds, prices of short-term governments fell about point, intermediate maturities fell about point and long-term issues were down as much as 1 point, according to the investment firm of Salomon Bros. The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

In light to moderate corporate trading, industrials and utilities fell about 3/8 point in light trading.

Among tax-exempt municipal bonds, general obligations rose about 1/2 and revenue bonds were unchanged.

Yields on three-month Treasury bills rose four basis points to 6.20%. Six-month bills rose six basis points to 6.27%. One-year bills were up five basis points at 6.31%. A basis point is one-hundredth of a percentage point.

The federal funds rate--the interest on overnight loans between banks--traded at 6.818%, down from 7.625% late Tuesday.

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