Wall Street continued to ring in the new year with bells and whistles Monday by extending Friday`s rally into record-breaking territory.
Analysts are calling the broad-based drive a delayed version of the traditional year-end rise that was suppressed by strong tax-related selling at the end of 1986.
The Dow Jones industrial average jumped 44.01 points to 1971.32, topping the previous closing high of 1955.57 set Dec. 2 and the previous biggest one- day point increase of 43.41 set Nov. 3, 1982.
The average of 30 blue-chip stocks ended Friday with a 31.36-point gain, although volume was light because of the holidays.
”The typical Christmas cheer didn`t show up in 1986, and this created a high level of short-term skepticism and a high level of sideline cash, two ingredients you need for a rally,” said Alfred Goldman of A.G. Edwards & Sons in St. Louis.
Gainers outnumbered losers by more than 10 to 1 among issues listed on the New York Stock Exchange. Volume on the Big Board came to 181.85 million shares, up from 91.88 million Friday. Nationwide turnover in NYSE-listed issues was 209.31 million shares.
”The noteworthy thing about Monday`s performance was its breadth,” said Hildegarde Zagorski, of Prudential Bache Securities Inc. ”One of the problems so far has been that the broader market has been lagging behind the Dow. But a number of indexes as well as the Amex and Nasdaq over-the-counter markets were right up there Monday. It looks like this market wants to run ahead.”
Many analysts had predicted the Dow would hit 2000 by the end of 1986, but instead it dropped below 1900.
”I guess we all missed how really damaging the tax selling was,” said one.
”There`s a lot of money accumulated from people who took profits and losses and that cash is coming back into the market,” said Eldon Grimm, a stock analyst with Birr Wilson & Co.
Dreyfus Corp.`s Monte Gordon said the market was not responding to any fundamental changes in the economy,
but to internal dynamics.
”We had a 31-point jump on Friday, but the volume was light. Then we had a lot of futures-related trading kick in Monday, and that prompted a lot of short covering, which added to the upward pressure. Then all the institutional buyers who had been sitting on the sidelines because of the tax selling decided they better get in,” he said. ”It was a fun day.”
Jack Baker, of Shearson Lehman Brothers Inc., said the market also had a bullish reaction to a relatively strong bond market, where prices of some 30- year Treasury issues ended the day up $7.50 per $1,000 face amount.
In addition, Baker said, stock prices reacted favorably to reports about President Reagan`s health.
Ralph Acompora, a technical analyst for Kidder, Peabody & Co, predicted the rally would ”last a few days. The question is whether it`s sustainable.” Gordon added that Monday`s action ”is the stuff of which corrections are bred.”
”The market may hit that magnetic field around 2000 and resist. If it does pass 2000, the likelihood of a correction increases, and we could see it fall back 10 to 12 percent.”
The NYSE composite index was 3.38 higher at 144.39, a record single-day point increase, according to NYSE officials.
The previous record rise of 2.93 points was set on Nov. 3, 1982, officials said.
Standard & Poor`s 500-stock composite index was up 5.74 to 252.19, exceeding a Nov. 3, 1982, record for a single-day point increase, according to S&P officials.
At the American Stock Exchange, the market value index rose 4.58 to 272.07.
The Nasdaq composite index for the over-the-counter market closed at 361.19, up 7.93.
Blue-chip issues dominated the NYSE`s most-active list Monday.
Among those, General Electric rose $2.75, to $90.12; American Express was up $1.87, to $59.75; and International Business Machines increased $1.62, to $123.62.
