Dow index bulls ahead to 28-week high


NEW YORK -- The Dow surged 57.42 points yesterday to close at 2,934.65, a 28-week high, on a strong bullish bias in trading tied to expiring options on stock indexes and resumption of heavy buying by institutions.

The Treasury bond market and U.S. stocks trading in Europe received an early morning boost from a Baghdad radio broadcast reporting an offer to withdraw from Kuwait.

But observers said the euphoria had almost entirely dissipated by the time stocks opened in New York.

Early excitement tied to the Iraqi broadcast was soon punctured by the elaboration of a series of conditions for withdrawal. The United States and its allies had pronounced these unacceptable before the war began.

Advancing issues led declining ones more than 5-to-2 on active volume of 222 million shares. That was down slightly from the 230 million traded Thursday.

Among Dow components, Merck surged 4 3/8 , to 102, at the head of an extremely strong group of drug stocks. Other rally leaders were IBM, up 2 1/4 at 137 3/8 ; International Paper, up 2 3/4 at 64 3/4 ; General Electric, up 2 1/8 at 69 5/8 ; and Procter & Gamble, up 2 3/8 at 85.

Sears managed a hefty 1 7/8 gain, to 33 1/4 .

Other Dow stocks posting full-point gains included Du Pont, General Motors, Coca-Cola, Philip Morris, and United Technologies.

Gainers among drug stocks included Pfizer, up 3 3/8 at 104 7/8 ; Amgen, up 1 7/8 at 84 7/8 ; and Johnson & Johnson, up 3 at 81.

Airline stocks posted notable gains, evidently aided by expectations that air travel would increase dramatically with any end to the Middle East hostilities.

For the week, the Dow rose 103.96 points on trading volume that topped 200 million shares each day.

The Standard & Poor's 500 and NYSE Composite indexes both registered all-time highs at yesterday's close.

"The economy continues to provide hope for the bulls because we're already, by some measures, perhaps seven months into a recession, andthe average recession since the Second World War has lasted only 11 months," said Thom R. Brown, a strategist for Rutherford, Brown & Catherwood in Philadelphia.

Dramatic upward market momentum probably will bring the Dow at least close to 3,000 before the rally runs out of steam, Mr. Brown said. "We'll have a pullback then, but the psychology of the market meantime will have improved significantly," he said.

Joseph Barthel, a technician at W. H. Newbold & Sons, said market sentiment has indeed improved.

According to polls by Investors Intelligence in New Rochelle, N.Y., in the past four weeks -- since the Persian Gulf war began -- the number of bullish market-advisory services has surged to 51.3 percent from 33.6 percent, he said. Though troublesome from a contrarian viewpoint, those are not yet extremely bearish readings for the market, Mr. Barthel said.

He also cited an Investors Intelligence study of the number of stocks rising above their 10-week and 30-week trends.

"This week's reading of 92.5 percent of NYSE stocks above their 10-week moving average and 79.4 percent above their 30-week moving average marks an extremely overbought [market] but is of particular significance for the bulls," Mr. Barthel said.

Since 1967, those indicators have had readings of more than 90 percent and 70 percent, respectively, he said.

"The Dow always moved higher" in those cases, Mr. Barthel said, with an average gain of 18.5 percent in value.

An 18.5 percent advance from Thursday's close would send the Dow slightly over 3,400.

On those six occasions, "it took 23 weeks, on average, before the market once again entered into oversold territory," he said.

There was a glaring exception, however, in October 1973. The 10-week indicator was only a single percentage point from signaling a new market advance, and the 30-day indicator effectively locked in a positive reading.

On that occasion, the Dow rose a mere 1 percent, then tumbled for eight weeks until only 5 percent of NYSE stocks were above their 10-week moving averages.

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