Wall Street rang out the last day of summer with a sizzling rally Tuesday that sent the Dow Jones industrial average soaring a record 75.23 points to 2568.05.
Despite the rally, which topped the previous one-day record gain of 69.89 on April 3, observers were uniformly skeptical that the market could sustain such gains.
”I have said the market would have a 10 percent correction in the fall or early winter, and this wasn`t it,” said Byron Wien, senior market analyst at Morgan Stanley & Co.
”What you had was a mini-stampede develop,” said Michael Metz, market strategist at Oppenheimer & Co. ”A lot of people were looking for a reason to get in, afraid of missing another runup.”
A firming dollar and a strong bond market propelled stocks, as well as expectations that Wednesday`s consumer price report will be better on the inflation front than earlier believed. Oil stocks were particularly strong because of tension in the Persian Gulf.
Futures-related buy programs also played a part in the rally, just as sell programs had forced the bellwether Dow average to give up more than 8 percent of its value in the last four weeks.
Gainers outnumbered losers by 2 to 1 on the New York Stock Exchange on trading volume of 209.5 million shares. Nationwide turnover in NYSE-listed issues, including trades on regional exchanges and in the over-the-counter market, was 239.38 million shares.
Broader market averages also rose, though not as sharply as the blue-chip Dow. The NYSE composite index closed at 178.48, up 4.23. The American Stock Exchange index rose 1.58 to 351.33. In over-the-counter trading, the Nasdaq composite index was up 1.89 to 437.90.
Tuesday`s trading had begun much like Monday`s, with an opening gain of 10 points followed by a sharp reversal and a 15-point deficit in the first 40 minutes.
But analysts cited a number of factors that made Tuesday different. The dollar firmed in the wake of an attack Monday by a U.S. helicopter gunship on an Iranian ship that was said to be laying mines in the Persian Gulf. That drove oil stocks up sharply and produced a strong showing in the bond market, with prices rising as long-term Treasury bill yields dropped to 9.51 percent from 9.62 percent.
The government also released an encouraging report on the federal deficit, showing it has narrowed somewhat. ”There were traders with a lot of cash out there,” said Hugh Johnson, chief investment officer of First Albany Corp., Albany, N.Y. ”You could almost see them sitting on their haunches waiting to pounce.”
Still, with an hour to go, the Dow was up just over 37 points. What doubled the gain in the last hour, analysts said, were traders covering short positions and the kicking in of arbitraged buy programs linked to sharply higher stock-index futures.
The rally emphasized the increasing volatility of the market. ”This market is capable of wide moves,” said Monte Gordon, director of research at Dreyfus Corp. ”It could easily move in the 2400 to 2700 range and still be in a corrective phase.”
Traders will certainly attempt to keep the rally going, analysts said, but there is no guarantee they`ll succeed. Said Metz, ”It could fizzle by the end of the week.” Added Johnson, ”It might be good for another week, but my opinion is it won`t last. We haven`t seen the low for this correction.”
On the Big Board`s most active list, Newmont Mining was up $1 at $95 after its Monday announcement of a $33-a-share special dividend.
International Business Machines picked up $5.25, to $155.75; General Electric gained $2.87, to $62.50; and National Semiconductor gained $1.37, to $18.50.
Among oils, Exxon was up $2.75 at $49; Phillips Petroleum was up 12 cents at $16.12; and Chevron was up $3.87 at $53.87.
