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German Rate Cut Helps to Boost Stocks

August 23, 1996|From Times Wire Services

An interest rate cut in Germany helped spur a broad advance in stocks Thursday, led by technology shares, putting the Dow Jones industrial average back within 1% of its all-time high.

The Dow rose 43.65 points to 5,733.47, its best finish since before July's sharp sell-off. The barometer of 30 big U.S. companies, which slid below 5,200 at the depths of that plunge, has now rebounded to within 45 points of its record close of 5,778.00, set May 22.

Without the steep slide of Dow component Philip Morris amid the latest assaults on the tobacco industry from Washington, statehouses and the courts, a record would have been set.

"We're living in a global economy, so if you get a revival somewhere else it helps us," said Mark Stumpp, chief investment officer at PDI Strategies in Short Hills, N.J., which manages assets of $22 billion. "Roughly 20% of [U.S.] GDP is related in some way to exports, and a fair chunk of that obviously is related to Europe."

U.S. bonds erased an early gain and were little changed as a rise in weekly claims for unemployment benefits did little to ease concern that a robust labor market will speed inflation later this year.

The dollar rose against the mark after the German central bank reduced its 14-day repurchase rate for the first time since February. It cut the rate to 3%, the lowest since the Bundesbank started open market operations in 1979.

In late New York trading, the dollar rose to 1.4928 marks from 1.4827 marks on Wednesday. The dollar was little changed, trading at 108.20 yen, down from 108.46 on Wednesday.

"There's been a barrage of mark selling," said Andy Chaveriat, currency strategist at Paribas Capital Markets in London. Lower rates often hurt the mark by making German deposits less attractive.

Among U.S. stocks, broader measures advanced, led by the Nasdaq market, where computer-related shares followed through on Wednesday's late surge.

Advancing issues outnumbered decliners by a 12-7 margin on the New York Stock Exchange, where volume totaled 354.49 million shares, the first tally above 350 million in 11 sessions.

The Standard & Poor's 500-stock index rose 5.61 points to 670.68, its first finish above 670 since early July and less than 8 points from its May 24 record.

The NYSE's composite index rose 2.61 points to 358.72, about 5 points from its all-time high.

The Nasdaq composite index rose 17.12 points to 1,143.96, and the American Stock Exchange's market value index, which also is dominated by technology and smaller companies, rose 2.64 points to 560.32.

The benchmark 30-year Treasury bond yield rose to 6.84% from 6.83%.

Israel, Citicorp and a Utah agency took advantage of low interest rates to sell more than $4.3 billion in securities. Although the 30-year Treasury yield is up from 6.69% on Aug. 12, it is below the 7.01% of a month ago.

More companies, municipalities and consumers are borrowing this month amid growing confidence that slower economic growth will allow the Federal Reserve Board to continue to delay raising bank lending rates, as it did Tuesday.

"You've had a rally in the market and you're at levels we haven't seen since April," until recently, said Peter Mahoney, who oversees $5 billion in bond funds at Bear Stearns Asset Management.

Among Thursday's highlights:

* Tech issues Dell Computer jumped 3 1/4 to 64 3/8, Intel rose 2 3/4 to 83 and Cisco Systems gained 1 3/8 to 57 5/8, all on Nasdaq. On the NYSE, Hewlett-Packard rose 1 1/8 to 43, and IBM, the Dow's only technology component, rose 3/8 to 112 5/8.

* Tobacco shares were pressured again by the news late Wednesday that President Clinton was poised to approve the nation's toughest crackdown on tobacco, possibly by today, by classifying nicotine as an addictive drug. RJR Nabisco fell 1/8 to 25 1/8. Philip Morris fell 7/8 to 86 3/4, leaving the stock nearly 20 points shy of its peak of 106 5/8 on Aug. 2.

* Oil stocks soared as the price of Texas crude oil surged 58 cents to $22.30 a barrel. Mobil leaped 2 1/8 to 115, Texaco climbed 1 1/8 to 91 1/8 and Exxon rose 5/8 to 83 1/2.

* Dura Pharmaceuticals jumped 5 3/4 to 32 1/2. The San Diego company bought exclusive U.S. marketing rights to a pair of oral antibiotics from Eli Lilly for $100 million. Lilly rose 3/8 to 59 3/4.

* Boston Chicken rose 1 5/8 to 32 1/4 after announcing it would triple to 2,700 the number of outlets it plans to open over the next five to seven years.

Overseas, Frankfurt's DAX index rose 0.5%, London's FTSE-100 rose 0.5% and Tokyo's Nikkei stock average rose 0.4%.

Market Roundup, D8

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