Dow soars a record 257 points Money managers awash in cash pick up blue chips

Bell sets bulls running

Manufacturing index helps by lessening interest-rate fears

September 03, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

The bulls came rushing back from vacation yesterday and pumped the Dow Jones industrial average up a stunning 257.36 points -- its biggest one-day point gain in history.

The closely watched index, made up of 30 blue-chip stocks, closed at 7,879.78, up 3.4 percent.

Yesterday's gain, however, wasn't close to the Dow's biggest percentage increase, 14.87 percent on Oct. 6, 1931, when it went up 12.86 points. Yesterday's increase was the largest percentage gain since Jan. 17, 1991, when the Dow jumped 4.6 percent.

In one day, the Dow nearly erased last week's 265-point loss.

"Momentum begets more momentum," said Joseph V. Battipaglia, chief investment strategist with New York-based Gruntal & Co. LLC. "Today, the momentum was on the upside."

The Dow soared after the opening bell as many brokers, traders and money managers came back from summer vacation.

"They had a lot of cash and they put it to work in the market," said John Sweeney, chief investment officer of Baltimore-based USF&G Corp. "The cash that is flowing in from the 401(k) plans and from the pension plans, they have to put that to work."

Richard Cripps, market strategist with Baltimore-based Legg Mason Inc., agreed, saying: "If you are a money manager, you can't afford to be out of the market when it rises."

Cripps said money managers were buying blue-chip stocks that were beaten up last week when many of the managers and brokers were away.

Shares of Procter & Gamble Co., which slipped 13 percent in the past month, rose $4.875 to $138 yesterday, and Coca-Cola Co., which also has been beaten down, rose $2.562 to $59.875.

The stock market received a second boost during the day when the National Association of Purchasing Management released a survey that said its manufacturing activity index fell to 56.8 percent in August from 58.6 percent in July.

The index is important because it gauges economic activity and economists use it as a component in determining how fast the economy is growing.

The lower number eased fears that the Federal Reserve Board will raise interest rates to cool off the economy.

"That served as a catalyst to get this thing exploding," said Philip Orlando, chief investment officer of Value Line's Asset Management division.

Some industry experts believe that the stock market's wild swings signal the end of the bull market.

'Volatility unlimited'

"It is volatility unlimited," said Larry Wachtel, market analyst with New York-based Prudential Securities.

Wachtel said volatility is a way of life. He said 100- and 200-point swings don't mean much today with the Dow so high. In many cases, the volatility is driven by computer trading programs that buy and sell huge amounts of stocks.

"You are at a point where the Dow swings," Wachtel said. "In the final hour of trading last Friday, it fell 70 points with no reason. There was nobody around, for crying out loud."

Indeed, there is considerable debate about whether the 15-year bull market has run its course. And the wild swings are adding fuel to the fire.

Sweeney said the market could have reached a peak because of the volitility, but added, "I don't know you could say that anymore because of all of the cash flowing into the market."

Profits slowing

He sees the market rising to the 8,000 to 8,200 level this year. But Sweeney said corporate profits, which have helped the market climb, are slowing.

"It is hard to get real negative, but it is hard to get real positive," Sweeney said.

Battipaglia doesn't see the stock market losing steam any time soon. He believes that the economy will continue to grow, helped by strong corporate earnings, low inflation and low interest rates. All will drive the stock market higher, he said.

Before the year is out, Battipaglia sees the Dow hitting 8,500.

"Then we work on next year," he said.

He believes the Dow can easily reach 9,500 if the economy holds out.

"I think '98 is going into a similar story" to 1997, Battipaglia said.

The Dow's biggest point gains

The Dow Jones industrial average had its largest daily point gain in history yesterday. While the rise wasn't close to the biggest percentage increase, it was the strongest since January 1991. In terms of points gained, here are the best days for the average, including the percentage change in value.

Date .............. Points ... Close ........ Pct.

Yesterday ......... 257.36 ... 7,879.78 ..... 3.4

Oct. 21, 1987 ..... 186.84 ... 2,027.85 ..... 10.1

April 29, 1997 .... 179.01 ... 6,962.03 ..... 2.6

April 22, 1997 .... 173.38 ... 6,833.59 ..... 2.6

July 22, 1997 ..... 154.93 ... 8,061.65 ..... 1.9

June 24, 1997 ..... 153.80 ... 7,758.06 ..... 2.0

May 5, 1997 ....... 143.29 ... 7,214.49 ..... 2.0

April 15, 1997 .... 135.26 ... 6,587.16 ..... 2.1

Dec. 19, 1996 ..... 126.87 ... 6,473.64 ..... 2.0

Jan. 17, 1991 ..... 114.60 ... 2,623.51 ..... 4.6

Pub Date: 9/03/97

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