Stocks Score Sharp Gains; Dow Rises 16 : Hopes for Declining Interest Rates Fuel Rally; Volume Light

Hopes for lower interest rates helped the stock market stage a sharp advance Friday, recouping losses suffered early in the week.

Trading continued at a sluggish pace, however.

The Dow Jones average of 30 industrials jumped 16.51 to 1,543.00, finishing the week unchanged from last Friday’s close.

Volume on the New York Stock Exchange came to 81.56 million shares, against the low for the year of 62.05 million traded Thursday.

A holiday-season atmosphere continued to prevail on Wall Street. But among those traders who were taking part, buying interest was spurred by renewed talk of a possible cut in the Federal Reserve’s discount rate.

In the credit markets, that speculation helped push prices of government bonds, which move in the opposite direction from interest rates, up slightly.

Falling interest rates have been cited as a major reason for widespread hopes among investors that the economy will turn in a solid performance in 1986.

Dow Jones Down, Up

With a drop of 23.85 points Monday and Tuesday and a rise of exactly the same amount Thursday and Friday, the chart of the Dow Jones industrial average for the week forms a pronounced “V,” with the Christmas holiday at the turning point.

But analysts said it was fitting that the sum of all the fluctuations came out at zero, at least in terms of the Dow. In the absence of so many vacationing traders, they said it was a chancy proposition to read any significance in the ups and downs of the market.

Next week holds out the prospect of more of the same, with the New Year’s holiday on Wednesday splitting the week in half. However, it was generally expected that the pace of activity will quicken as the year’s end passes.

Rumors that Litton Industries is about to buy back the approximately 26% stake that Teledyne owns in Litton at a price of more than $100 a share sent Teledyne’s stocks up 17 to 336. Litton closed at 84 1/2, up 5.

In Friday’s advance, computer and technology stocks chalked up some of the best gains. International Business Machines gained 2 to 155 1/2; Digital Equipment, 3 1/8 to 133 7/8; Sperry, 1 5/8 to 54, and Burroughs, 1 1/8 to 63 3/8.

Auto issues did well, apparently on hopes that new below-market financing offers by General Motors and Ford Motor for certain models would serve to work down car inventories quickly. GM rose 3/4 to 71 7/8; Ford, 1 to 57, and Chrysler, 1 1/8 to 45 1/2.

Boeing Also Gains

Boeing, which got an order for 15 passenger planes from All Nippon Airways, added 1 1/8 to 50 1/8.

In the daily tally on the Big Board, more than five issues rose in price for every two that lost ground. The exchange’s composite index climbed 1.09 to 120.62.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 99.03 million shares.

Large blocks of 10,000 or more shares traded on the NYSE totaled 1,547 compared to 1,055 on Thursday.

Standard & Poor’s index of 400 industrials rose 0.71 to 230.83, and S&P;’s 500-stock composite index was up 0.51 at 207.65.

Bond prices showed strength again in light trading amid the speculation that the Federal Reserve System will ease credit conditions to spur economic growth.

Traders seem to believe that the Fed is injecting more money into the banking system than is necessary to compensate for the heavy demand that is common at this time of the year, said Geoffrey L. Kurinsky, an economist for Technical Data Corp. in Boston.

Feels Fed Should Wait

Kurinsky said his company is less optimistic than the market consensus about the Fed’s credit-easing intentions and thinks the Fed will wait until around February to cut the discount rate, the fee that it charges on loans to banks and savings institutions.

The Fed has repeatedly added reserves to the banking system in recent days. On Friday, it arranged $1 billion in customer repurchase agreements. Kurinsky said he viewed the move as merely technical, although other traders seized on it as a reason to bid bond prices higher.

In the secondary market for Treasury securities, prices of short-term governments ranged from down 1/32 point to up 1/16 point, intermediate maturities rose between 1/16 point and 1/2 point and long-term issues rose between 3/16 point and 1/2 point, according to the investment firm of Salomon Bros. The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, edged up 0.10 from late Thursday to 111.34. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 0.97 to 1,167.11.

Industrials, Utilities Up

In corporate trading, industrials and utilities were up 1/8 point in light trading.

Among tax-exempt municipal bonds, revenue bonds rose 3/8 point in active dealings, and general obligations were up 3/8 point in moderate trading.