NEW YORK -- Rising skepticism about share prices evaporated yesterday as the Dow Jones industrial average shot up 63.86 points, to 2,945.05, and broader indexes surged to new records.
The bellwether Standard & Poor's 500 rose 8.20, to 379.50, exceeding its prior peak of 376.20 reached on March 5. The NASDAQ over-the-counter index closed up 10.34 at 491.20, breaking its Oct. 9, 1989, record of 485.73.
The rally came on only moderate volume, on a day that began with the release of yet another round of government statistics suggesting the economy is mired in a recession. And it came only a week after a modest slump in share prices suggested to many Wall Street gurus that the bull market of early 1991 had ended.
"There was a theory that with the end of the first quarter the market's rise was all over, and I think this refutes it," said Michael Sherman, strategist for Shearson Lehman Brothers. "I didn't see a piece of news today that indicated why stocks should be higher, but what is germane is that there is money to be invested.
"Yields on money-market certificates of deposit have fallen to just over 6 percent and some short term tax-exempt securities are paying as little as 4 percent, prompting many investors to seek out alternative areas for investment," Mr. Sherman said.
The Federal Reserve Board has recently acted to bring down interest rates, and its efforts are expected to continue as long as the economy weakens -- a scenario that leads many analysts to conclude that Wall Street may actually benefit from the broader troubles of U.S. businesses.
Given investors' focus on rates and the apparent indifference to poor corporate results, Michael Aronstein, of Comstock Partners, a New York investment firm, remarked, "I'm not sure anyone is really concerned about traditional valuation based on earnings, cash flow or dividends."
Investors, said James Neel, strategist of the Kemper family of mutual funds, have begun looking beyond the current poor results on the assumption that next year's earnings will be higher and that interest rates will continue to come down. "We'rein a bull market and we've been in one since last fall," he added. "We believe it will go to new highs from here."
For the past months, share prices have rocketed back and forth, with the Dow vacillating between 2,825 and 3,000, making a mockery of most forecasts. Yesterday's low volume reflected comments from major Wall Street investors who indicated they were torn between an unwillingness to miss a major move and concern that shares were too expensive.
Recent economic reports suggest business conditions are poor, but some economists maintain that they contain signs the decline may be bottoming out. Yesterday, the Commerce Department announced factory orders had declined in February for the fourth month in a row -- a bleak report since lower demand for factory goods often is followed by layoffs and increasing unemployment, deepening a recession.
A report by Dun & Bradstreet based on a monthly survey of 1,000 manufacturers concluded that manufacturing output continued to decline throughout March. But the magnitude in the month-to-month declines registered in both the Commerce Department and Dun & Bradstreet reports have declined since late last year.
Dun & Bradstreet economist Douglas Handler said inventories and unfilled orders in the most recent period have remained flat, suggesting manufacturers have adjusted to current realities and the demand may be at least stabilizing, with the possibility that improvement lies just ahead.
A related survey by Dun & Bradstreet on manufacturers' expectation for coming months showed a bottoming in November, which coincided with the greatest drop in orders. .
"Retail sales are up, housing starts are up and manufacturers' confidence is up," said Mr. Handler. "We are starting to see elements of a turnaround in some key areas. It's too soon to see how robust the trend will be, but I think it's safe to conclude we have hit bottom. And given that, there is no where to go but up."