STOCK MARKET RALLIES; '96 EXCEEDS EXPECTATIONS

Will the party last?

The question is making the rounds among stockbrokers and investment circles.

An economic climate of low inflation, falling interest rates and expanding corporate profits has served as a backdrop for a bull market that is awesome in magnitude and duration, say investment brokers in the Cape Girardeau area.

Blue-chip stocks rose to record highs as bond prices rose following a report of weak factory orders. But lower technology shares dampened gains in the broader market.

At Friday's 4-p.m. close on Wall Street, the Dow Jones industrial average was up 14.23 at 6,560.91, surpassing its previous closing high of 6,547.79 on Nov. 25.

The stock market is enjoying a year-end rally prompted by investors who want to buy shares that have performed well this year. That explains the over-performance today of large-company stocks over smaller ones, said Jim Weiss, senior portfolio manager at State Street investments in Boston.

During the past six years the stock market has increased more than 150 percent.

"Today's investors have enjoyed the longest bull market of the century," said Donna Domian of Edward Jones in Cape Girardeau. "And 1996 has been a great year for the market, exceeding all analysts' expectations."

"The economy and the stock market continued their rising ways in 1996," said Marsha Limbaugh, branch manager of the A.G. Edwards investment firm in Cape Girardeau. "We believe the market will continue to grow, but more slowly in 1997."

Domian agreed: "I think there will still be growth, but I think we'll see high single-digits rather than double-figure growth."

Bart Osbun, manager of the local Merrill Lynch investment office, said the run could go into the new year.

"The anticipation is that the market will continue to grow as long as the inflationary climate stays under control." said Osbun. "We're expecting a pretty good January."

November was a great month for the Dow.

On the Monday before Thanksgiving, blue-chip shares soared more than 76.03 points to a 12th record close of 6,547.79. That defied expectations for a Thanksgiving week slowdown and boosted the Dow Jones industrial average above 6,500 just six weeks after its first close above 6,000.

It was the best one-day gain for the blue-chip barometer since a 96-point rally Nov. 6, the day after Election Day.

November 1996 finished as a record month for the Dow, with 492.21 points, compared to the previous high of 219 in November 1995. But the percentage gain of 8.2 percent was far short of the 40.2 percent advance the Dow logged more than 60 years ago, in April 1933.

How much longer can it go on? Will the Dow reach 7,000 early next year? How high will it go?

There is no way to know for certain, say stockbrokers.

Said Domian: "It's not simply time that brings a bull market to its end. Unexpected bad news about the economy is usually the cause."

Michael Sivy, Money Magazine's Wall Street editor and chief investment strategist, said investors who have built up a cash stash will be able to scoop up some bargains as the Dow industrial averages start heading toward 9,000 during the next five years.

And Obsun said some analysts are talking about "10,000 by the year 2,000."

A decline is in store in 1997, said Sivy. Then expect a mid-to-late-year rebound, he said.

As always, said Domian, there are things to be concerned about. Rising wages could push inflation higher, and the first year of a presidential term historically has been tough on stocks.

But for the most part, she said, "There appears to be no major factors that could prevent the stock market from having another good year in 1997."

Limbaugh said, "Because we believe the economy and stock market will show slower growth next year, investors will have to pay an even greater attention to identify buying opportunities."

A.G. Edwards chief economist Raymond Worseck is confident the U.S. economy will continue growth. He said the European and Japanese economies will serve as major influences on the U.S. economy.

Worseck said European and Japanese consumers have had a delayed reaction to their economies' current expansions, but those attitudes should start moving in a more positive direction next year. He also anticipates real gross domestic product growth, which measures the increase of products and services produced by U.S. companies, to rise about 1.8 percent in 1997, compared to the projected 2.3 in 1996.

Stock prices today already reflect much of the good news regarding inflation and interest rates. If these two items stay low, appreciation in the stock market in 1997 will depend on continued economic growth and further increases in corporate earnings. A fair expectation for 1997 is for stock prices to continue to rise, although much more modestly than in the previous two years.

One of the keys to success in stock investing in 1997, say brokers, will be choosing the right industries. As investors have witnessed over the past several years, the leaders in the stock market can change abruptly from one industry to another.