Late retreat keeps Dow from setting new record

WALL STREET

June 03, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks edged higher yesterday as low long-term interest rates continued to support the market.

The Dow Jones industrial average failed to set a record for a second straight day, however, as the average pulled back in the final 30 minutes of trading. The Dow industrials closed up 1.11, at 3,553.45, just below its record closing high of 3,554.83.

"The stock market keeps climbing, and it shows no signs of letting up as long as interest rates stay low," said Kenneth Liebler, president of Liberty Financial Services Inc.

Billions of dollars continue to be poured into stock funds as investors switch money from low-yielding fixed-income securities, Mr. Liebler said. When rates fall, fixed-income investments like bonds become less attractive when compared with stocks.

"That's the main reason why stocks are as high as they are," said Richard Meyer, head of institutional trading at Ladenburg, Thalmann & Co. "If this situation changes, the stock market is in big trouble."

The Standard & Poor's 500-Stock Index rose 0.02, to 453.85, and the Nasdaq Combined Composite index advanced 1.58, to 705.86. The American Stock Exchange Market Value Index increased 1.37, to a record 439.97, eclipsing the prior high of 438.93.

Advancing common stocks led declining issues about 10-to-9, with shares of computer, aerospace and pollution control companies recording the biggest gains.

The stock market is being influenced by long-term interest rates and speculation about whether the Senate will support President Clinton's deficit-reduction plan.

"It appears that Clinton and the Senate will work together to get the president's economic plan passed," said Dennis Jarrett, market analyst at Kidder, Peabody & Co.

Stocks rallied Tuesday after key senators expressed readiness to compromise on key parts of Mr. Clinton's plan, such as a proposed energy tax.

The market also received a boost as plunges in gold prices and the Commodity Research Bureau's index of 21 commodities calmed concern about inflation, traders said.

"Investors are definitely watching Washington to see whether President Clinton can get his deficit-reduction package through Congress, said John Blair, head trader at NatWest Securities. "Right now, it looks pretty good."

The yield on the benchmark 30-year Treasury government bond was unchanged yesterday, at 6.88 percent. Long-term bond yields were little changed as the government released conflicting reports about the economic recovery.

Trading on the New York Stock Exchange was active, with about 295 million shares changing hands.

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