Stocks take another spurt on sighs of a US upturn

Signs that the economy may be reviving helped to give the rally on Wall Street still another spurt last week. Investors were particularly impressed by the governmetn's report that the June index of leading economic indicators rose 2.4 percent, more than most analysts on Wall Street expected, and by reports that auto sales were beginning to pick up again. Furthermore, the government reported that new factory orders in June declined only 0.5 percent, as against 3.1 percent in May.

An additional impetus to the market came late Thursday when Merrill Lynch, Pierce, Fenner & Smith Inc., the nation's largest broker, announced it is bullish on American again.

The giant broker says that for the first time in three years it is advising its customers to buy stocks aggressively.

These factors all combined to give the market another lift, pushing the Dow Jones industrial average up 13.39 points for the week. It closed at 931.48. Volume was very heavy all week. In fact, the New York Stck exchange reports that volume in July was the second heaviest in the exchange's history, eclipsed only by the trading in January of this year.

The better economic prospects were confirmed by the National Association of Purchasing Managers in their July report on business conditions. The survey found that the rate of decline, particularly for new orders, ahd slowed from the May and June levels. Inventory levels continued to liquidated, reaching a reduced level not seen since 1975. There are few shortage items. Despite the better news, however, the report concluded that "all in all, conditions are still negative."

To Merrill Lynch analysts Richard J. Hoffman and Steven R. Resnick, there are some positive signs now indicating the stock market is ripe for a major bull move. These signs included the resumption of real growth in the money supply, as measured by M2, to negative year-to-year changes in industrial production. In the past, the analysts say, such changes have correlated with major market moves.

The Merrill Lunch analysts thus advised their clients to reduce their cash reserves form 20 or 25 percent to 10 percent. Major areas to invest in included airlines, autos, and other cylical stocks. Earlier they had recommended home building, savings, and loan, and property-liability companies. They still maintain that these areas have significant upside potential.

Alan Shaw, an analyst with Smith Barney, Harris Upham & Co., agrees that the market has embark on a major upward move. However, all the signs now point to some kind of correction before the market moves any higher, he says. "We must wring out the exeses of the past three or four months," he said, noting, "Our short-term indicators have turned from red to crimson."

Smith Barney is telling its clients t lighten up in the aerospace, distilling , machine tool, office equipment, and domestic and international oil stocks while buying stocks in aluminum, chemical, electronics, forest product, paper, pollution, and steel companies.

Just to confuse matters, Argus Research last wek told its clienst that it believes it is unlikely that the market will embard on any major pullbacks. Argus says its research finds it is rare for the market to make any major downward moves after classic business cycle-rleated troughs. Thus, the research service is sticking to its guns that the Dow average coult top 1,000 by year-end , and perhaps sooner if a "Reagan rally" ensues.

In the marekt last week, the oil stocks were pounded as investors took profits after their long run-up. Ostensibly prompting the run on the oils were reports of significant surpluses of oil and the subsequent lowering of oil and gasoline prices by some companies.

American Telephone & Telegraph stock was also actively traded and lower after a House panel in Washington approved a bill that would prevent AT&T from competing with newspapers, magazines, and broadcasters in gathering and disseminating news.

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