The roaring bull market that has investors spellbound raced to new heights yesterday as the Dow Jones industrial average burst through the 8,000 mark for the first time.
News of high company profits, tame inflation and low interest rates ignited a buying frenzy on Wall Street.
The Dow -- the index made up of 30 bellwether companies -- rose 63.17 points to finish at 8,038.88 -- its 32nd record close of the year.
And the hot Nasdaq composite index, made up of scores of high-tech companies, had its biggest point-gain ever, shooting up 38.52 points to close at a record 1,580.60 points. In the last 10 trading days alone, Nasdaq is up 113.02 points, the equivalent of nearly 600 Dow points.
"It is amazing," said Mark Vitner, economist with Charlotte-based First Union Capital Markets Group. "I admit, I scratch my head."
The market is "just rolling right now," said David M. Citron, who manages a $170 million portfoliofor Baltimore-based Wagner Citron Management Corp. "Why couldn't the Dow be up another 400 or 500 points? I wouldn't even try to guess how far it is going to go because the liquidity is there, the momentum is there."
The Dow has now doubled in less than 2 1/2 years. It has added nearly 1,600 points, or nearly 25 percent, this year, nearly matching last year's 26 percent gain and far more than what most analysts had predicted for all of 1997.
It took the Dow about five months to race from 7,000 points in February to 8,000 points, after taking about four months to move from 6,000 points in October to 7,000.
Ralph J. Acampora, head of technical research at Prudential Securities Inc., and one of the most bullish bulls on Wall Street, has said the Dow will hit 10,000 by June.
Some analysts say the latest rally is being fueled in part by people who have been on the sidelines, and are suddenly throwing money into stocks.
"Now it seems there is a rush to buy stocks," Vitner said. "If you don't buy it today, the price is going to get higher."
It was that kind of thinking that caused booms and busts in the prices of farm land in the 1970s and commercial real estate in the 1980s, Vitner said.
"I fear that is what we are seeing in the stock market," he said.
"Higher stock prices are preferable to lower ones, but the recent run-up may have been a bit too much," Vitner said.
In February, Greenspan warned that investors were overly confident that the stock market would keep climbing, and said the central bank could be forced to raise interest rates.
The comments followed a suggestion by Greenspan in December that "irrational exuberance" had taken hold of Wall Street.
Since then, the Dow has climbed more than 1,000 points.
Two reports helped fuel the market's rise yesterday. The Labor Department's Consumer Price Index rose just 0.1 percent in June, bolstering beliefs that inflation is in check. Separately, the Federal Reserve said that production of cars, computers and aircraft remained strong.
The strong showing has not been limited to the Dow and Nasdaq.
The Standard & Poor's 500 stock index, a wider gauge of performance, rose 10.83 percent to close at 936.59. It is up more than 26 percent since the beginning of the year, while the Dow is up 24.67 percent and the Nasdaq is up 22.43 percent.
The New York Stock Exchange had its fifth busiest day ever, trading 646.00 million shares.
Robert Freedman, chief investment officer with Boston-based John Hancock Funds, said the market can rise even higher because interest rates are falling, inflation is low and corporate profits are surprisingly robust.
"The tone and long-term fundamentals of this market look excellent," Freedman said. "If interest rates continue to drop we could gather [200 to] 300 points on the upside as long as the other factors stay in place. The momentum is very strong."
Pub Date: 7/17/97