Newspaper article THE JOURNAL RECORD

Stocks Close Sharply Higher

Newspaper article THE JOURNAL RECORD

Stocks Close Sharply Higher

Article excerpt

NEW YORK (AP) _ Stock prices rose sharply Tuesday, pushed higher by lower interest rates, some positive economic news and diminished concern about inflation.

The Dow Jones industrial average surged more than 40 points, briefly eclipsing its all-time high, before falling back to close up 24.91 points at 3,552.34.

Advancing issues outnumbered declines by about 12 to 7 on the New York Stock Exchange.

Volume on the floor of the Big Board came to 229.65 million shares as of 4 p.m., up from 207.81 million Friday. The market was closed Monday for Memorial Day.

Until late in the session, stocks moved steadily higher, following the sharp rally in bond prices and the corresponding decline in interest rates.

"Stocks were driven by bonds," said James Melcher, founder and president of Balestra Capital in New York.

Bonds performed well for four reasons, having mostly to do with diminished inflation fears, said Hugh Johnson, chief investment officer at First Albany Corp. Inflation erodes the value of fixed-income investments such as bonds.

Compelling evidence of lower inflation was offered by a decline in the Commodity Research Bureau's index of 21 futures contracts, Johnson said.

Gold prices, considered an indicator of inflation concerns, also tumbled.

And there was more good news on inflation embedded in an economic report from the National Association of Purchasing Managers. The group's report on manufacturing activity showed declines in vendor performance and commodity prices _ both considered leading indicators of inflation, Johnson said.

Finally, prospects for passage of President Clinton's deficit reduction package improved over the weekend. A smaller deifict could bring lower long-term interest rates because the government would not have to borrow as much.

Adding to the positive sentiment engendered by the bond rally was some solid economic news. …

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