If this is the January effect, let’s just abolish February and keep going.
The Dow Jones industrial average Thursday posted its eighth record closing high of 1994, gaining 7.59 points to 3891.96 on continued strong trading volume.
Broader market indicators also rose. The Nasdaq composite index regained all that it lost on Wednesday plus a hundredth of a point to close at a record high 793.03, up 3.75 points. Bond prices firmed, despite an upbeat report on home construction.
Market observers long have noticed that stocks, especially small-company stocks, rise in January as new money flows into the market from pension funds and mutual funds.
A positive January is a reliable predictor of a rising market for the year, but there is little correlation between the size of the gains for January and the year.
For example, the Standard & Poor’s 500 index’s best January since 1950 was a 13.2 percent increase in 1987. But the gain for that year, thanks to the October market crash, was only 2 percent. A 4.3 percent January rise in the S&P 500 in 1958 was followed by a 38.1 percent gain for the year, according to Yale Hirsch’s Stock Trader’s Almanac.
So far this year, the Dow industrials are up a modest 3.7 percent.
Among the contributors to Thursday’s advance were better-than-expected earnings reports by Kimberly-Clark, Microsoft and Tandem Computer.
Japan watch
A year ago, newly installed President Clinton was developing an economic stimulus package that Congress largely rejected. Now, Japan’s new prime minister, Morihiro Hosokawa, is beginning the same process.
If Hosokawa first can pass a series of political reforms, odds are he’ll have better luck than Clinton with a deficit-financed stimulus package calling for public works projects and a tax cut.
Financial markets in Japan want the political reforms and stimulus package. Neither would be enough to convince international investors that Japan has turned the corner from its painful recession, but failure of the measures would be disastrous for the Hosokawa administration.
If Japan’s economic initiatives are enacted and produce beneficial results for the country that exceed expectations, the current global attitude of fiscal and monetary restraint will lose some luster.
World financial markets have not yet considered the consequences of a resurgent Japan led by government spending. Politicians here and in Europe will be quick to read the message.
Local news
– W.W. Grainger, a leading distributor of industrial equipment, gained $2.12 to $63.75. The Skokie-based company is regarded on Wall Street as a solid but unspectacular performer. This current rally results from strong sales in the fourth quarter-December alone was up 16 percent from a year earlier-and a belief that Grainger will benefit from the California earthquake, said Jack Murphy, who follows the stock for Prudential Securities in New York.
The company has 19 distribution centers in the Los Angeles area selling a wide range of products that could be used in the cleanup and rebuilding effort.
– Bob Gabele, who follows buying and selling by corporate insiders for CDA Investment in Florida, reports that insiders at Healthcare Compare in Downers Grove were selling the stock in November and December after it moved above $20 a share.
Last April, Gabele noticed the same selling pattern at the $20 level. The stock soon fell to near $10. On Thursday, Healthcare Compare closed down 25 cents to $23.62.
– Arthur J. Gallagher, an insurance brokerage company based in Itasca, boosted its quarterly dividend 22 percent to 22 cents a share from 18 cents, payable April 15 to shareholders of record March 31. The payout boost apparently displeased investors. The stock dropped $2.87 to $31.37.
