The stock market rallied Friday as buyers clamored for issues that stand to benefit from the recent plunge in oil prices.
The Dow Jones average of 30 industrials surged 18.69 to 1,529.93, trimming the loss for the week to 6.77 points.
The Dow transportation index, powered partly by interest in airline stocks, soared 20.42 points to a record 739.79, surpassing the previous peak of 723.31 on Dec. 16.
The buying binge also spilled over into other segments of the market.
Advancing issues outnumbered decliners by nearly three to two on the New York Stock Exchange. "Upon reflection, everybody has finally realized the positive impact lower oil prices will have on the economy," said Charles Jensen, chief technical analyst for MKI Securities.
Low energy costs have enhanced the inflation outlook at a time when economic activity seems to be picking up, analysts said.
Gains in Banking Group
Earlier in the week, traders worried that weak energy prices would undermine the financial health of oil companies and banks that are carrying loans backed by energy-related assets. On Tuesday and Wednesday, traders sold off stocks of banks and oil concerns. But those stocks fared much better Friday.
In the banking group, Chase Manhattan rose 1 7/8 to 72 and Citicorp rose 1 3/8 to 49 5/8. Among the oils, Texaco rose 1 3/8 to 28 5/8, Chevron rose 1 3/8 to 36 1/2 and Occidental Petroleum rose 3/8 to 28 3/8.
Buyers flocked to airline stocks, many of which were among the volume leaders all day.
Republic ran up 1 to 15. Republic is to be purchased by the parent company of Northwest Airlines, NWA, which slid 7/8 to 47.
AMR jumped 3 5/8 to 47 7/8, UAL rose 2 to 55 1/2, TWA spurted 1 1/8 to 15, Eastern Airlines was unchanged at 6 1/8, Pan American rose 3/8 to 8 and Western rose 7/8 to 8.
Among the blue chips, International Business Machines gained 2 to 150 and American Telephone & Telegraph rose 1/8 to 22 5/8, both in heavy trading.
Union Carbide, which is also included in the Dow industrials, jumped 2 7/8 to 82 7/8. A Goldman, Sachs analyst strongly recommended buying Union Carbide stock, which helped fuel the advance, traders said.
Pepsico, which confirmed rumors circulating for weeks by announcing that it has agreed to acquire Seven-Up Co. from Philip Morris for $380 million in cash, rose 1 5/8 to 68. Philip Morris rose 1 7/8 to 91 5/8.
Government, corporate and municipal bond prices also scored gains amid hopes that weak energy prices will keep inflation down and help push interest rates lower.
In the secondary market for Treasury securities, prices of short-term governments rose 1/16 point to 3/32 point and intermediate maturities rose from 1/8 point to 7/32 point but long-term issues slipped 1/16 point, according to the investment firm of Salomon Bros.
Among corporate issues, industrials rose point and utilities rose 1/8 point. Trading was light.
In the tax-exempt municipal market, revenue bonds rose point in moderate dealings and general obligations spurted 1/2 point in busy activity.
Yields on three-month Treasury bills remained unchanged from late Thursday at 6.96%. Six-month bills fell three basis points to 7.07% and one-year bills slid five basis points to 7.13%.
Yields on 30-year Treasury bonds stood at 9.42%, up from 9.41% late Thursday.
The federal funds rate--the interest on overnight loans between banks--was unchanged at 7.938%.