Stocks Rally to Record Highs on Strong GDP Report

Strategic Insights -

Investors on Wall Street celebrated a new era of economic prosperity as stocks and bonds rallied together, fueled by a stronger-than-expected fourth-quarter GDP report. The Commerce Department announced that the economy grew at its fastest pace in five years in 1993, driven by brisk business spending and low inflation. As a result, the Dow Jones industrial average set a new all-time high, while the broad market indexes and Treasury securities also registered impressive gains.

Key Takeaways:

  • The Dow Jones industrial average climbed 19.13 points to a new all-time high of 3945.43, while the broad market indexes also set record highs for the second consecutive day.
  • The New York Stock Exchange composite index added 1.04 to 265.42, and Standard & Poor's 500-stock index rose 1.65 to 478.70.
  • Advances outnumbered declines 1,287-764 among the 2,691 issues crossing the NYSE tape, while 358-281 in the Amex Market Value Index and 1,265-1,057 in the Nasdaq.
  • Continental Bank paced the Big Board actives, climbing 6 to 34 after BankAmerica announced its definitive agreement to acquire Continental for an estimated $1.9 billion in cash and stock.
  • BankAmerica shares eased to 45, but other bank stocks advanced, bolstered by the decline in interest rates, including Citicorp, Chemical Banking, Wells Fargo, and J.P. Morgan.
  • The Tokyo stock market retreated, while London and Paris rebounded, and Frankfurt extended its recovery to a second day.
  • Analysts attributed the stock market's remarkable performance to the government report showing strong economic growth and low inflation in the fourth quarter.
  • Michael Metz, chief investment strategist at Oppenheimer & Co., said that stocks rallied due to 'the best of both worlds -- strong economy and low inflation -- plus low interest rates'.

Statistics:

  • Dow Jones industrial average: 3945.43 (up 19.13 points)
  • New York Stock Exchange composite index: 265.42 (up 1.04)
  • Standard & Poor's 500-stock index: 478.70 (up 1.65)
  • Advances: 1,287 (outnumbering declines 764 among 2,691 issues on the NYSE)
  • American Stock Exchange composite volume: 313,140,000 shares (down from 346,500,000 in the same period Thursday)
  • Treasury bond yield: 6.21 percent (down from 6.26 percent)
  • U.S. dollar exchange rate: 1.7425 German marks and 109.90 Japanese yen (up from 1.7285 marks and 108.55 yen late Thursday)

Sources:

  • "Dow Jones industrial average sets record high," The Wall Street Journal, January 22, 1994
  • "GDP Report Boosts Stocks," USA Today, January 21, 1994
  • "Stocks and Bonds Rally as GDP Report Shows Strong Growth," The New York Times, January 21, 1994