ROANOKE TIMES 
                      Copyright (c) 1997, Roanoke Times

DATE: Friday, February 14, 1997              TAG: 9702140074
SECTION: NATIONAL/INTERNATIONAL   PAGE: A-1  EDITION: METRO 
DATELINE: NEW YORK
SOURCE: The Washington Post


DOW JONES SHATTERS 7,000 MARK STOCK MARKET'S RISE MERELY LAW OF SUPPLY AND DEMAND

The Dow Jones industrial average shattered the 7,000 mark Thursday and Ralph Acampora could not contain himself.

``It's going to hit 8,250 by year-end,'' gushed the chief technical analyst for Prudential Securities Inc. ``And that's subject to upward revision.''

Acampora is one of Wall Street's fiercest raging bulls. A lot of people are listening to him and others like him now, as they pour billions upon billions of dollars into the U.S. stock market each month. As that money funnels in, the rise in stock prices becomes a self-fulfilling prophecy, a simple balance between supply and demand.

Demand for stocks is high. Supply isn't keeping up, especially with the dozens of corporate stock-buyback plans and mergers, so prices rise.

There are fundamental reasons why stocks are an attractive investment now, apart from the new cash inflows. Inflation is low, interest rates are stable, the economy continues expanding and corporate earnings are strong, all of which are positive for stocks. And for the past three years, most alternative investments have not been able to provide even half the return of U.S. stock investments.

Investors don't see those fertile conditions changing anytime soon, so they're sending the market even higher. The Dow rose 60.81 points Thursday to close at 7,022.44, an 8.9 percent return since the start of the year. The Standard & Poor's 500 index also hit a new high, rising 9.05 to 811.82.

Bond prices supported the stock market's rise, as the price of the bellwether 30-year Treasury bond jumped more than a point, which reduced its yield to 6.62 percent from 6.70 percent on Wednesday.

It was only four months ago when the Dow crossed the 6,000 mark, which it did much more nervously, taking a week to flirt with the threshold before closing a session above it. Analysts at that time were cautious about whether fourth-quarter corporate earnings would hold up. This week, flush with stronger-than-expected earnings reports and beating back an earlier drop in technology shares, the Dow marched up 166.64 points and through 7,000 with little hesitation.

``It's been an emotional market to say the least,'' said Joseph N. Cangemi, a New York Stock Exchange floor trader. ``I wouldn't be surprised if the momentum carried us through 8,000 or maybe 9,000. By the year 2000 I might see 10,000 as a reasonable level for the Dow.''

There are plenty of experts who sound a note of caution. ``People need to remember that Wall Street is a two-way street. It goes up and down,'' said Donald Cassidy, senior research analyst at Lipper Analytical Services Inc., which tracks mutual-fund performance.

Acampora's response? ``Don't listen to bears,'' he said. ``They don't know what they're talking about.''

Two Roanoke stockbrokers agreed that consumers' money flowing into mutual funds from retirement plans is responsible for the soaring market.

Lindsey Quesinberry, vice president at the Roanoke office of J.C. Bradford & Co., said $6 billion had been deposited in mutual funds just in the last week. "That's a big inflow, even by recent standards," Quesinberry said.

Although the advance was led by blue chips, Quesinberry said the stocks of small companies also began to advance.

He said Thursday's push over 7,000 was also partially due to a rise in bond prices. "The Treasury auction went very well today," he said.

Tyler Pugh, senior vice president and manager of the Roanoke office of Wheat First Butcher Singer, said his customers were not surprised at Thursday's record. People were more surprised when the Dow crossed 6,000, Pugh said.

"Big moves have become somewhat common," Pugh said, but the market cannot continue to go up at the present pace without some corrections. He, too, said retirement money in mutual funds is pushing the gains in the market.


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