Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 18, 1991 TAG: 9104180316
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: The Washington Post
DATELINE: NEW YORK LENGTH: Long
Extending a rally that was triggered by the United States' military Wednesday's market report. B5 success in the Persian Gulf War, and has been fueled by the Federal Reserve Board's steady lowering of interest rates, the Dow average of 30 blue-chip stocks climbed 17.58 points to close at 3004.46. Trading was heavy, at more than 248 million shares.
The previous closing high for the Dow, the oldest and best-known average of stock prices, had been 2999.75 last July.
"It's historic, glorious, fantastic," said James E. Cayne, president of Bear Stearns & Co., a leading brokerage firm. "The people who forecast doom temporarily are wrong. The people who forecast that the Dow would hit 3000 will be drinking champagne tonight."
Cayne and other Wall Street professionals cautioned that the Dow's rise above 3000 was important largely for its psychological impact, because it calls attention to the rally and could encourage investors to buy more stock.
They noted that other, broader market indexes had repeatedly set new records in recent weeks, although without attracting the attention that the Dow's jump Wednesday was sure to generate.
But these analysts also said that the strong and broad-based rally since mid-January was an important signal that investors believe that the U.S. economy will turn upward in coming months and boost corporate profits.
"What the markets are saying is that inflation is not going to be a factor, that the restructuring of corporate America is proceeding and that higher productivity and profitability will be a reality in 1992 and beyond," said William A. Schreyer, chairman of Merrill Lynch & Co., the nation's largest brokerage company.
The market seers at Merrill Lynch are predicting that the current rally still has a way to go. "They're looking for somewhere in the 3100 to 3200 area" for the Dow, Schreyer said.
Some Roanoke brokers said the 3004.46 close was merely the crest of a long bull market.
Business has been very good all of this year, reported Dean Penley, manager of the Roanoke office of J.C. Bradford & Co.
He pointed out that broader gauges of the market, such as Value Line and Standard & Poor's 500, have been trading at record high levels. The venerable but more limited Dow industrial index is just catching up, he said.
With falling interest rates and depressed real estate, he noted, "the stock market is the only game in town." Penley said customers have not only been buying stocks, but also turning more speculative by venturing into option and index trading.
He's "cautiously optimistic" about the future because his firm's analysts project a level of 3100 for the market to reach full value. "The momentum is there," Penley said.
Tyler Pugh, vice president at the Roanoke office of Wheat First Securities, said he found both enthusiasm and skepticism, the latter because the market has in the past retreated from the 3000 threshold.
He said, however, that the gain was "very positive" and may establish a new trading level.
Richard Wertz, assistant manager at the local office of A.G. Edwards & Sons, called Wednesday "just a normal day" because everyone was expecting it. The market "finally broke it, and that's it."
"There's no big hoopla," Wertz said.
William Nash, Roanoke manager for Scott & Stringfellow Investment Corp., said he was "glad to finally see it happen." Closing about 3000 is a positive step, he said, and the market "might go on from here."
It was unclear until the last quarter-hour of trading whether the Dow would manage to stay above 3000 through the close.
It had moved above 3000 for about two hours at midday, and traded as high as 3013 before falling back shortly after 2 p.m.
In the final hour of trading, however, the Dow again rose above 3000 and seemed steady enough that New York Stock Exchange President Richard A. Grasso and Vice Chairman Donald Stone made a special trip to the floor to ring the closing bell at 4 p.m. to mark the occasion. Traders and clerks applauded, cheered and threw confetti.
There did not seem to be any single, outstanding reason for the market's rally Wednesday. Some analysts cited positive earnings announcements by AT&T and Phillip Morris, both of which are components of the Dow average.
The reports contributed to a sense that profits in the first quarter were not as bleak as many had feared. In general, though, Wall Street strategists and portfolio managers said Wednesday's jump in prices was simply a continuation of the rally that has lifted the Dow 371 points since the start of the year, and more than 600 points since it hit bottom in October, two months after Iraq's invasion of Kuwait.
The principal nourishment for the rise in stock prices has been the Fed's easy money policy. That has pumped cash into the economy, and, by lowering interest rates, made stocks a more attractive investment than interest-paying money market accounts or certificates of deposit. It may seem odd that the stock market is touching record highs when the economy is still stuck in a recession. But it is normal for the financial markets to look ahead and anticipate events in the economy.
"Always, always the best time to invest in the market is during the latter half of a recession," said Franklin Kennedy, a senior vice president at Equitable Capital Management Corp., which has a $33 billion portfolio. "The market anticipates the turn in the economy. . . . It responds to the drop in short-term interest rates before the economy does."
Staff writer Mag Poff contributed information to this report.
by CNB