Small stocks hit another record high Dow up 10.26

WALL STREET

December 31, 1992|By Bloomberg Business News

NEW YORK -- More good news about the economy yesterday triggered a rise in stocks as the NASDAQ index of smaller stocks reached record levels.

"An awful lot of money is being thrown at this market on the notion that the economy is getting healthy," said John Brooks, market analyst at Yelton Fiscal.

The Dow Jones industrial average rose 10.26, to 3,321.10, recouping some of Tuesday's slump. The Dow's gain was led by International Paper, Goodyear and Aluminum Co. of America.

The NASDAQ index surged 2.85, and, for a second straight day, rose to an all-time closing high, reaching 671.86. The Standard & Poor's 500 index rose 0.84, to 438.82. Advancing stocks exceeded declining issues by about 4-to-3 on the New York Stock Exchange. Trading was moderate, with 185 million shares changing hands. The American Stock Exchange Market Value index increased 1.93, to 395.76.

Stocks were boosted by the Commerce Department's report that the index of leading economic indicators advanced 0.8 percent in November, bolstered by improving consumer confidence. It was the biggest one-month gain since January. The Purchasing Management Association of Chicago said manufacturing activity increased in December.

The two reports offset the Commerce Department's announcement that sales of new single-family homes fell 8.3 percent in November, the largest decline in eight months.

"There's no question the economy is getting better," said Eric Miller, chief investment officer at Donaldson Lufkin & Jenrette Securities. "The bigger question is how much higher can stocks go."

"The stock market's already at high levels, so it's hard to think it can rise much more," said Cummins Catherwood, managing director at Rutherford, Brown & Catherwood.

Stocks are benefiting from year-end buying as investment firms use available cash to reposition portfolios. Institutional investors are holding about 10 percent of their assets in cash. In addition, more than $9 billion will be returned to investors tomorrow from redeemed municipal bonds, and billions in certificates of deposit will mature.

Some of this money will be used to buy stocks, so it is unlikely, Mr. Catherwood said, that stocks will fall over the next few weeks. "But, gradually, over time, I think you'll see the stock market drift lower," he said.

Glaxo, which rose $1.25 Tuesday, gained 50 cents yesterday, to $23.875, on the heels of Food and Drug Administration approval of the company's migraine drug, Imitrex.

IBM climbed 37.5 cents, to $50.125, after announcing that it had won a 10-year contract valued at about $3 billion to provide McDonnell Douglas with information services. The stock has been depressed since the computer maker said earlier this month that it plans to take a $6 billion charge against fourth-quarter earnings to eliminate more jobs and consolidate manufacturing.

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