German Cut Sends Dow Up 39 Points : Market Overview

Stocks rocketed higher as a cut in Germany’s discount rate fueled hopes of a round of global interest rate reductions.

* Signs of a slow economic recovery stoked a powerful rally in the Treasury market, pushing down long-term interest rates.

* The dollar tumbled against all major currencies, and gold prices rose.

Stocks

In a long-anticipated move, Germany’s Bundesbank lowered its discount rate, a lending fee to banks, to 7.5% from 8%.

The cut is expected to encourage Germany’s partners to trim their own interest rates to boost their economies, which in turn should boost U.S. exports. Central banks of Switzerland, Denmark and the Netherlands also lowered their interest rates.

The bond market also responded, and analysts said the drop in yields fired up demand for stocks.

The Dow Jones industrial average rose 38.90 points to 3,465.64. Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange. Volume on the floor of the Big Board came to 241.18 million shares.

Also lifting sentiment on Wall Street was a brisk recovery in Japanese stock prices, which boosted the Nikkei average 554.53 points, or 3.05%, to 18,727.90, a new 1993 closing high, analysts said.

Elsewhere overseas, Frankfurt’s 30-share DAX average ended 11.11 points higher at 1,696.19. London’s Financial Times 100-share average lost 10.2 points to close at 2,879.7.

Among the market highlights:

* A number of Dow components posted hefty gains, including Allied Signal, up 1 1/8 to 68 1/2; AT&T;, up 1 1/4 to 58 1/2; DuPont, up 1 1/4 to 47 7/8, and General Electric, up 1 1/4 to 88 3/8.

* Tokos Medical slumped 1 3/4 to 6 3/4. It said it expects first-quarter revenue to fall below year-ago levels.

* Despite the weak economic news, auto stocks were strong. Ford rose 2 7/8 to 51 5/8 in active trading after Salomon raised its 1993 earnings estimate by $1.15 per share to $3.25 and its 1994 estimate by 60 cents to $6.25 per share. General Motors added 1 to 39 3/4.

* Anheuser-Busch rose 1 5/8 to 52 3/8. The company said late Wednesday that it expects a disappointing first quarter. On Thursday, its chief financial officer said he still believes that the company can post double-digit per-share earnings increases in 1993.

Credit

The bond market’s rally came one day after the market seemed to dismiss as an aberration a higher than expected increase in a key inflation rate, easing fears that increased consumer prices would erode the value of bonds.

The yield on the Treasury’s main 30-year bond plunged to 6.78% from 6.865% on Wednesday. Prices jumped 1 3/32 points Thursday, or $10.94 per $1,000 in face amount. Bond prices and yields move in opposite directions.

The federal funds rate, the interest on overnight loans between banks, was 2.938%, down from 3.25% late Wednesday.

Other Markets

The dollar’s drop against the German mark occurred despite the cut in the German discount rate.

The dollar closed in New York at 1.642 marks, down from Wednesday’s 1.662.

The dollar’s trading day began with a minor decline in Tokyo and closed in New York at 115.65 yen, down from 117.20 on Wednesday.

Meanwhile, gold rose $1.50 to $330.80 an ounce on New York’s Commodity Exchange, and silver gained 4.8 cents to $3.671 an ounce.

On the New York Mercantile Exchange, light, sweet crude oil for April delivery rose 12 cents to $20.29 a barrel.

Market Roundup, D6