Wall St soars above 2100 points

Press, 21 January 1987, Page 25

Wall St soars above 2100 points

NZPA-Reuter New York Wall Street stocks soared to close above 2100 points for the first time on Monday despite the fact that the battered dollar hit record lows in Asia and closed sharply lower in New York.

The key Dow Jones industrial average gained 25.87 points to 2102.50 for a record-matching 12th straight consecutive gain. The 100-point rise from 2000 to 2100 was the quickest in history, taking just 11 days. The previous record was the 1700 to 1800 advance from February 27, 1986 to March 20, 1986.

However, the dollar closed at 151.60 Japanese yen, up from its post-war low of 149.98 to which it fell earlier in Asia but well down on its previous New York close of 153.20. The U.S. currency also fell to 1.8175 Deutsche marks from 1.8415 on Friday.

Analysts said the developments contradicted each other because a weaker dollar reduces the value of U.S. assets and puts pressure on inflation because it increases the price of imports. In addition, the recordbreaking dollar lows come on top of sluggish growth in the economy and lacklustre corporate earnings. While some argued that recent signs of economic upturn were helping to fuel the rally, along with restraint in inflation and interest rates, others said the massive liquidity of pension funds and other sources, having no more productive use in the economy, was simply being turned to the business of speculating in stocks.

“This is the most unprecedented bull market in history, and the only logical explanation is that there is an ocean of liquidity out there and a

frenzy of feeding on the market’s own momentum,” said Larry Wachtel of Prudential Bache Securities.

The fast-paced rally has generated momentum of its own, he said, with each participant believing he can buy stocks and exit before the inevitable pullback. With U.S. banks closed for the Martin Luther King holiday, trading in the dollar was severely limited.

However, the sell-off of the U.S. currency began earlier in the day in Asia following U.S. Senate Finance Committee chairman, Lloyd Bentsen’s call for a 120 to 125 'dollar/ yen rate and an unsourced “Newsweek” report that the U.S. Treasury would deem a 140 dollar/yen rate and a 1.70 dollar/mark rate appropriate, given the huge size of the U.S. trade deficit;