Newspaper article THE JOURNAL RECORD

Falling Interest Rates Boost Stock Indicators to New Highs

Newspaper article THE JOURNAL RECORD

Falling Interest Rates Boost Stock Indicators to New Highs

Article excerpt

NEW YORK (AP) _ Falling interest rates helped buoy stocks Monday and several major market indicators ended at record highs, but caution ahead of fresh data on the economy tempered enthusiasm for blue-chip stocks.

The Dow Jones industrial average rose 3.36 points to 3,643.99, below the average's intraday high of about 14 points.

Advancing issues outnumbered declines by about 13 to 9 on the New York Stock Exchange.

Volume on the floor of the Big Board came to 191.34 million shares as of 4 p.m., down from 194.79 million in the previous session.

The main engine behind Monday's stock advance was the bond rally and corresponding dip in market interest rates, analysts said. Stocks and bonds have often moved in tandem recently because lower rates enhance the returns on share prices relative to interest-bearing investments.

Utility stocks rallied on the falling yields. Utility companies have substantial debt loads and lower yields cut their cost of borrowing. Bell Atlantic, for example, rose 2 to 63.

In addition, stocks received impetus from foreign markets. In Tokyo, the 225-issue Nikkei Stock Average gained 0.6 percent, while in Frankfurt stocks rose 0.9 percent and in Paris, they jumped 1.0 percent. In Britain, financial markets were closed for a Bank Holiday.

Although stocks have set several record-highs recently, they are not being driven by any newfound confidence in the economy or in the government, said Hugh Johnson, chief investment officer at First Albany Corp.

"They are being driven by the enormous shift of funds from banks _ where interest rates offered are so low _ into stock and bond funds," Johnson said. Indeed, the Investment Company Institute said Monday money continued to pour into mutual funds in July, usually a time when investors think more about vacation than stocks and bonds.

Of the total, a record $14.9 billion went into bond and income funds, and $10.2 billion went into stock funds.

Generally, however, trading was lethargic and directionless Monday; market volume was relatively low. …

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