Stocks rally despite rate concerns

March 05, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks rallied yesterday as investors shrugged off speculation that the Federal Reserve might raise interest rates as soon as Monday. Auto, computer and retailing stocks led the advance.

The Dow Jones industrial average closed 7.88 higher at 3,832.30, after climbing as much as 22.8. General Motors Corp. and United Technologies Corp. led the gain.

The average fell as much as 9.28 in the first half-hour as speculation of a rate increase swept the market. Since the Fed raised rates a month ago, the average has fallen 3.6 percent.

Talk of a rate increase was fueled by a report showing the economy created 217,000 nonfarm jobs last month, more than most private-sector forecasts. Economists at CS First Boston predicted the Fed would raise rates by 1/2 percentage point on Monday.

"I can't imagine them taking such a precipitous step after what happened to the stock and bond markets" since the last rate increase a month ago, said Peggy Farley, chief executive officer of the $260 million Amas Securities Inc. "It would be an economic setback if the fed funds rate were raised again."

Among broader market indexes, the Standard & Poor's 500 index rose 1.73 to 464.74. The Nasdaq Combined Composite Index climbed 5.97 to 790.55, buoyed by gains in Intel Corp. and Tele-Communications Inc. The American Stock Exchange Market Value Index rose 0.83 to 466.48.

The Dow Jones Utilities Average, a barometer for interest rates, rallied 1.84 to 212.10 as investors brushed aside the prospect of higher interest rates.

Five stocks rose for every three that declined on the New York Stock Exchange. Trading was active, with about 312 million shares changing hands on the Big Board.

The yield on the benchmark 30-year bond closed at 6.83 after yesterday's high of 6.92 percent, the highest since last June. The closing was unchanged from Thursday.

Tele-Communications, Price/Costco Inc., Intel, Dell Computer Corp., and Telefonos de Mexico class L American depositary receipts were the most actively traded stocks on the U.S. composite list.

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