Stocks jump as interest rates tumble Dow up 38.90


March 19, 1993|By Bloomberg Business News

NEW YORK -- Stocks soared yesterday after German and U.S. interest rates fell and a report showed that initial claims for unemployment benefits fell 25,000 in the two weeks that ended March 13.

The Dow Jones industrial average rose 38.90 points, to close at 3,465.64. Yesterday's session high of 3,477.26 put the Dow just below its record closing high of 3,478.34, set March 10.

The Dow surged more than 50 points in the final half hour, triggering the New York Stock Exchange's "downtick" rule for the first time since March 8. In an effort to stabilize the market, the rule blocks some computer-driven trading of rising stocks.

"The Bundesbank cut its rate, and that hasn't failed to give the stock market a boost yet," Philip Smyth, a stock market analyst at Birinyi Associates, said, referring to the German central bank.

Among broader market mea sures, the Standard & Poor's 500 index rose 3.57, to 451.88. The Nasdaq Composite index, hurt by falling health-care and computer stocks, fared worse than other market averages, rising 0.01, to 687.41, after having fallen 8 points Wednesday. Advancing common stocks exceeded declining issues by 2-to-1 on the New York Stock Exchange.

Yesterday's performance recalled a similar rally Feb. 3, when rate cuts in Germany and Japan fueled a stampede into dollar-denominated assets. "Because Germany cut their interest

rates by half a point, that makes our rates relatively more competitive," said John Blair, head equity trader at NatWest Securities.

Treasury bonds rose after the Bundesbank's decision to cut the discount rate to 7.5 percent, from 8 percent, the report of a relatively high number of jobless claims despite the decline in claims, a drop in imports and exports in January and a report from the Federal Reserve Bank of Philadelphia suggesting slower economic activity.

The benchmark 30-year Treasury bond jumped 1 and 1/32, to close at 104 11/32. The yield was 6.78 percent, down 8 basis points on the day. Falling interest rates tend to make stocks more attractive relative to fixed-income securities.

"I think the stock market is following the bond market right now," said Barry Berman, head trader at Robert W. Baird.

Trading was active, with 242 million shares changing hands on the NYSE.

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