Stocks rally, Dow rises 53.83 points

April 22, 1994|By New York Times News Service

NEW YORK -- U.S. stock prices surged yesterday in extremely heavy trading after a three-day slump that had decimated many technology stocks. The market was aided by a strong rally in the bond market and powerful first-quarter earnings by IBM and other blue-chip stocks.

The Dow Jones industrial average rose 53.83 points, to 3,652.54, and the broader Standard & Poor's 500 rose 6.77 points, to 448.73.

But it was the Nasdaq composite index, heavy with battered technology stocks, that rose the most, up 13.22 points, to 718.74. Such well-known companies as Intel, Oracle, Cisco Systems and Apple Computer all rose Thursday, having fallen 10 percent or more in recent sessions.

The benchmark 30-year bond rose 16/32, to 88 12/32, with the yield falling to 7.21 percent, down from 7.32 percent late Wednesday.

Whether the market "correction" is over, though, is still open to question.

The Dow has fallen some 326 points, or about 8 percent, from its January peak. The S&P 500 has fallen some 33 points, or 7 percent, from its February peak. These two leading indexes hit a correction of roughly 10 percent early this month.

Moreover, volume was light in the bond market, possibly exaggerating yesterday's rally that helped lift stocks. Stable borrowing costs help the performance of companies and, therefore, stocks.

"You have an extremely illiquid market because people like me are more or less on the sidelines," said Glen T. Insley, director of fixed-income management for First Union National Bank, which manages $12 billion in bonds and money-market instruments.

"What do we really know that we didn't know yesterday? Not enough to justify this kind of rise in bond prices."

Peter I. Cardillo, director of research for Westfalia Investments, said yesterday's session was a sign that the financial markets were stabilizing.

In retrospect, he said, the sharp sell-off in both the stock and bond markets since February was because both markets were extremely overpriced. Traders, he said, seized on the market fears of the day -- disappointing earnings, the Whitewater affair, even tensions concerning North Korea -- to bring down prices.

And what of the 10-week-long market obsession with inflation, when there was little credible evidence of it? "False alarm," Mr. Cardillo said.

At the very least yesterday, stock traders seemed to be taking a more benign view of the three more immediate factors that move the financial markets -- inflation, interest rates, and corporate earnings.

Stronger-than-expected earnings by IBM jolted traders early. Its sharp price rise accounted for almost half of the Dow's rise in the morning. Some traders also seemed to assume that the Federal Reserve Board will raise short-term interest rates again soon, taming what little inflation is left in the economy.

This improved outlook by stock and bond traders helped the bond market dismiss a regional survey by the Federal Reserve Bank of Philadelphia yesterday that two months ago would have been certain to drive bond prices down.

The Philadelphia Fed reported that its April price index rose. Economists have criticized such indexes for indicating little, if anything, about future price increases.

Bond traders instead focused on a sharp rise in the Dow Jones utilities average, up 1.52 points to 201.16, the sixth gain in seven sessions. Utility stocks that pay high dividends, act like a combination of stocks and bonds, or so some analysts argue.

Volume on the New York Stock Exchange was unusually heavy at nearly 379 million shares, or almost 25 percent above this year's average of 304 million share.

The New York Stock Exchange composite index rose 3.52 points, to 248.18. Advancing stocks outnumbered losing stocks 1,573-to-704. The American Stock Exchange market value index rose 3.53 points, to 431.13.

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