The stock market, which started the week on a somber note, rallied strongly today, and trading volume was surprisingly stong for the day before a holiday.
The Dow Jones Industrial Average of 30 stocks closed up 12.89 to 888.91.
Analysts said that the Federal Reserve's decision to dismantle the credit controls it put in place last March had only a mild impact on trading as did a better-than-expected unemployment report for June.
"The Fed's action was expected to come sooner or later," said Newton Zinder of E. F. Hutton & Co. "What's happening is that there is an enormous amount of cash looking for a home. "The correction that has been anticipated just hasn't materialized and investors are throwing in the towel and buying stocks."
The market declined 13.91 last Monday in what many analysts thought was the start of a reaction to a two-month rally. But stock prices stabilized Tuesday and Wednesday and today closed higher than at the end of last week.
Zinder noted that many of the high-interest investments that were made three or six months ago are now maturing, and with interst yields down sharply investors are finding the stock market attractive.
If the Fed's actions had little impact on the stock market, it did aid the bond and money markets.
"Long-term bonds closed up about a point [$10 on a face value of $1,000], while intermediate issues closed up about one-half point. Treasury bill yields fell about 15 to 20 basis points [a basis point is 1/100 of a percentage point]," according to William Sullivan of the Bank of New York.
Sullivan said that the Fed's dismantling went further than most money market participants had anticipated, and as a result the reaction was "strong." m
Nevertheless, he noted, the markets declined slightly at the end of the abbreviated, preholiday trading session because the Fed did not move in to stop the federal funds rate from rising to 11 percent. In recent weeks, the Fed has kept the rate -- the interest banks charge each other for overnight loans of excess reserves and the interest rate, over which the central bank has the most control -- in a narrow range of 9 percent to 9 1/2 percent.
Sullivan said some investors think the Federal Reserve is easing up on credit availability but is willing to allow the price of money (interest rates) to rise again. Sullivan said he thinks the federal funds rate increase was because of a Federal Reserve miscalculation.
In trading on the New York Stock Exchange, 47.4 million shares changed hands, up from 43 million Wednesday and well above the 29.9 million shares that were traded during the market's Monday decline. The NYSE said 1,146 stocks rose in price while 373 fell.
On the American Stock Exhange, the index was up 5.02 to 306.36, and 422 issues gained in price while 169 declined.