SPURRED by low interest rates, the falling price of oil and other commodities, rising consumer confidence, and evidence that more Americans are now finding jobs, the United States stock market continues to post modest gains in share prices. Some analysts predict the stock market advances will last through December and into the first quarter of 1994.
``The stock market thrives on `moderation,' '' the word that now best describes the US economy, says Larry Wachtel, a vice president with the investment house Prudential Securities Inc. ``The US economy is performing far better than had been expected.'' As long as interest rates do not rise substantially, the stock market should continue to show gains, Mr. Wachtel adds.
Last week's economic news underscored an economy advancing at a moderate clip: The Conference Board announced that its consumer confidence index rose nearly 11 points in November, the biggest jump for the index this year. Personal income and consumer sales also are up, while new housing sales remain strong. On Friday the Labor Department announced the steepest drop in unemployment in 10 years, with the jobless rate falling to 6.4 percent in November from 6.8 percent in October. At the same time, the Commerce Department said the index of leading indicators rose 0.5 percent in October, the third straight month in which the index has risen. Growth to continue, slowly
Wall Street sees the statistics as forecasting sustained, not fervid, inflationary economic growth. Many economists now anticipate slightly slower growth in the first quarter of 1994 than in the fourth quarter of 1993. And that adds up to good news for equities, say market analysts such as Wachtel.
The stock market has dipped slightly in recent weeks, with the Dow Jones industrial average largely stalling in terms of posting per share gains. The broader NASDAQ composite index, which monitors many small company stocks, has declined slightly more than 3 percent so far this month.
Still, for the year as a whole, the market continues to advance. The all-time high on the Dow is 3,710.77 points, recorded on Nov. 16. The Dow, which measures large blue-chip companies, is now close to that number, around the 3,700 point range.
The current market advance is largely the result ``of declining oil prices,'' says Rao Chalasani, chief investment strategist for Kemper Securities Inc. in Chicago. Oil prices are down ``because of slackening demand abroad,'' reflecting economic difficulties in parts of Europe. But the dip in oil prices will enable many US companies to hold down expenses and boost profits. That will help shore up the stock market, Mr. Chalasani says.
Dennis Jarrett, chief market analyst for the investment house Kidder, Peabody and Company Inc., notes that the ``best four months'' on the US stock market since 1982 ``have been February, March, January, and December, in that order.'' Mr. Jarrett does not yet see signs of a major correction. Before a downturn can occur, he says, the market will first have to go up sharply. Bearishness is good news for stocks
Some of the favorable analysis about the stock market stems from - of all things - the high level of pessimism about the market. Bullish sentiment about the market from investors and analysts is now low, while pessimism is high, Jarrett says. That bearishness is actually good for stocks may seem confusing. But technical analysts who follow the stock market say when investor sentiment turns negative, as is currently the case, investors hold out cash that would otherwise be committed to stocks. (And, in fact, more money is now flowing into money market accounts than in recent weeks.) But such liquid assets, could quickly be sent back into the stock market as investor worries abate, thus helping to drive up share prices. Underlying economic fundamentals, such as low interest rates and climbing consumer confidence, help equities, the experts say.