Drop in Interest Rates Boosts Stocks
Investors, encouraged by Monday's steep decline in interest rates, sent stock prices soaring yesterday.</br></br>The Dow Jones Industrial Average rose 30.72, the fifth largest one-day rise in stock market history. It was the biggest gain since the Dow rose 35.34 points on Nov. 1, 1978, the day President Carter announced the first of several programs to fight inflation and rescue the U.S. dollar. That was the largest increase in Dow history.</br></br>The Dow average^ probably the most widely used barometer of stock market behavior, closed at 789.85. Tt had lost ground in each of tiie six trading days before yesterdayÛªs steep climb. The Dow, which lost 32.42 points in the previous six sessions, still is more than 100 points below its mid-February peak, when the average topped 900 for a day.</br></br>While the stock market responded jubilantly to the decline of nearly two percentage points in Treasury bill rates recorded Monday, the bond market was more restrained. Bond prices were mixed in quiet trading, with governments rising slightly in price and corporates and municipals either unchanged or up slightly.</br></br>Last week, when Chase Manhattan Bank announced a cut in its prime lending rate from 20 percent to 19% percent, bond prices rose on the average of $45 per $1,000 of face value, a one-day record. Many major banks since have reduced their prime lending rates to 19 ^2 percent.