NEW YORK -- The Dow industrials soared 64.85 points to close at 2,452.72 yesterday as an increasingly dynamic rally persisted despite afternoon news of fresh disturbances in Israeli-occupied territory, which sparked a sharp rally in previously depressed oil prices. Trading volume was heavy.
Advances outpaced declines on the Big Board by 5-to-2 on heavy volume of 204 million shares, up sharply from 161 million Wednesday.
Traders said market psychology generally improved amid what they termed generally acceptable corporate earnings reports, as well as strong leadership from such blue chips as International Business Machines, Procter & Gamble and Boeing.
The stock market also largely ignored record lows in the dollar against the German mark. The dollar was down 1.5 pfennigs by the time stocks closed, falling below 1.50 marks for the first time ever.
The August U.S. trade deficit was $9.33 billion, the Commerce Department said yesterday, about as expected and lower than the $10 billion or more anticipated by pessimists.
Excluding the higher prices paid for oil, the trade gap was little changed from July.
"The widening was due to higher-priced oil," said economist Joseph Plocek at McCarthy Crisanti and Maffei Inc. "It appears also that exports may have been inhibited for two reasons: One, Boeing did not ship planes overseas. And the other, our boats were diverted to the military."
A fair-sized advance in Japanese stocks overnight -- Tokyo's Nikkei-225 rose 508 points to 24,367 -- lent credence to arguments that global stock markets are beginning to firm up markedly and eventually should provide solid support for New York prices.
The New York Stock Exchange program-buying curb locked in at 12:10 p.m., and by early afternoon, news of new shootings of Arabs in Israeli-occupied territory sharply accelerated a lethargic rally already under way in oil prices.
November crude surged to a session high of $37.20 a barrel before closing at $36.80, up 8 cents. The bond market retreated from its highs, and stocks followed as the Dow trimmed its gain to 32 points at 2,420.
In a seesaw session, crude prices at first fell almost $2 a barrel as traders concluded the Persian Gulf stalemate posed no immediate threat to supplies and that war was not imminent. Wednesday the Energy Department said most of the supply disruption caused by the Middle East crisis had been compensated for.
Iraq announced that it would sell oil to anyone for $21 a barrel,
TC move some analysts said could mean a minor fall in prices. Others said it was largely propaganda.
With about an hour to go in the trading day, there were reports of a clash between Israeli troops and stone-throwing demonstrators in the Gaza Strip in which 26 Arabs were reported by the authorities to have been "lightly wounded."
The report was received as bullish news on the floor of the New York Mercantile Exchange, even though the Gaza Strip has been a hotbed of Palestinian nationalism for years and is about 700 miles from Kuwait.
In contrast to some rallies over the past few weeks, broad secondary market indexes kept pace with the blue-chip averages yesterday. Some traders said that at least an intermediate-term rally is taking shape after two months of generally falling prices.
Strategist Jack Conlon at Rothschild Inc. said his best guess for an October-November rally is for the Dow to rise to 2,700, "although I could be talked into 2,800 without too much trouble."
Such a rally probably would last six to eight weeks, Mr. Conlon said, adding, "The bulk of it will probably be premised on any combination of a satisfactory budget compromise, a Federal Reserve easing or some kind of breakthrough on a negotiated settlement over Kuwait."
But corporate earnings were an important part of the picture yesterday, analysts said. Few observers were euphoric over the heavy flow of earnings reports, but they did detect a subtle change in market psychology that prompted cheery receptions for middling corporate earnings that only a few months ago would have been shrugged off as non-events.
"It's really amazing to watch, but we're hearing people take earnings that are either at expectations or only a little above and say, 'Hey, that's great,' " said Trude Latimer at Jessup, Josephthal.