Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, April 6, 1994 TAG: 9404060107
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
The Dow jumped 82.06 to 3,675.41, a 2.28 percent advance and the largest increase for the index since Dec. 23, 1991, when the market's best-known barometer jumped 88.10 points to 3,022.58.
Stocks rallied sharply early on and never looked back. Investors responded in part to a jump in bond prices and corresponding decline in market interest rates, analysts said. The bond market's rally reversed steep declines in recent days.
``The market received some well-deserved relief,'' said Eugene Peroni, director of technical research at Janney Montgomery Scott.
A sharp rise in market rates since the Federal Reserve tightened credit Feb. 4 and then again March 23 had pulled stocks down about 9 percent from their highs.
Share prices had fallen so far that on Monday several brokerage houses recommended investors buy issues, saying many now are relatively cheap.
And some of the braver investors jumped into the market Tuesday, looking for bargains among stocks that had lost value. Analysts said they still expected choppy markets over the next several days.
``Things were overdone on the sell side,'' said Bill Allyn, managing director at Jefferies & Co.
Fundamentally, nothing has changed in the investment picture, Allyn said. The economy is still growing, and first-quarter corporate earnings, which begin in earnest next week, will reaffirm that, he said.
It was fear of future inflation as the economy gathers steam that caused the Fed to nudge up interest rates, and it was fear of inflation that has pushed market rates so far, so fast. The yield on the benchmark 30-year bond moved to 7.42 percent Monday before falling back to 7.25 percent Tuesday.
Bond investors dislike inflation, which erodes the value of fixed-income securities. Stock investors dislike higher interest rates, which make share prices less attractive and raise the cost of money to corporations.
Stocks sensitive to the economic cycles, such as autos, heavy machinery and chemicals, led Tuesday's advance. They were among the best performers as the economy has improved and were the hardest hit as interest rates rose. General Motors rose 21/4 to 571/4, and Caterpillar jumped 3 to 1161/4.
Technology stocks, mostly concentrated in the Nasdaq index, also helped lead the march higher. Lotus Development jumped 43/4 to 711/4.
Share prices moved up more than 50 points early in trading, triggering the NYSE's so-called ``downtick rule.'' When the Dow average drops or rises 50 points in a session, restrictions are placed on a form of computerized trading known as index arbitrage.
by CNB