Industrials Rise 27.26 To 3718.37 --- Stock Average Ignores Falling Bond Prices And Decline in Dollar
The Dow Jones Industrial Average gained more than 27 points to end above 3700, shrugging off falling bond prices and a falling dollar.</br></br>The blue-chip indicator, buoyed by reports that the Federal Reserve may hold off raising rates at its committee meeting next Tuesday, gained 27.26 to 3718.37. The Standard & Poor's 500-stock index rose 2.51 to 449.47, the New York Stock Exchange Composite Index climbed 1.09 to 245.26 and the Nasdaq Composite Index added 0.07 to 719.12.</br></br>Though worries about Orange County, Calif.'s financial problems continued to fester, traders said the market's focus has returned to interest rates and the economy's strength. Worried about slowing growth, or even a possible recession in 1995, stock analysts said a delay by the Fed could help stocks, at least in the short term. "To me it's like another reprieve from the governor while on death row," said Joseph J. McAlinden, chief market strategist at Dillon, Read & Co. in New York. "People think the Fed will hold off here so we have a little party and get a bounce in stock prices. But I still think the Fed will be moving to tighten credit again, if not on Dec. 20, then next month."</br></br>Meanwhile, bond traders fidgeted nervously throughout the session, sending bond prices lower in relatively quiet trading. Analysts said White House disclosures about a possible middle-class tax cut have sparked fears of a tax cut derby. Analysts fret that such a race, in which Republicans and Democrats would try to outdo one another with tax cuts, could create a burgeoning budget deficit, especially if commensurate spending cuts aren't readily identified. "Such a bidding war for tax cuts could push interest rates higher and increase the prospects for inflation," said Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis. "That has the bond market nervous."</br></br>World-wide, stock prices fell in dollar terms. The Dow Jones World Stock Index lost 0.03 to 110.65.