With the aid of a speculative boost in oil stocks, the stock market reached another record high Tuesday amid the second-strongest one-day rally in the history of the Dow Jones industrial average.
The Dow index of 30 major blue-chip stocks rose 43.10 points to close at a record 1,746.05. In terms of one-day increases, the rally was exceeded only by the Dow's performance on Nov. 3, 1982, when it rose 43.41 points.
The previous closing high for the average had been 1,713.99 on Feb. 27.
Analysts attributed much of the market's strength Tuesday to speculation in oil stocks, which benefited from an unexpected purchase recommendation by William Randol, an influential oil industry analyst for First Boston Corp., an important investment house. Such recommendations are closely followed by major institutional investors.
Most major oil company stocks were sharply higher in Tuesday's trading, with five of them among the 15 most active stocks on the New York Stock Exchange. Crude oil futures also gained, encouraging hopes that oil prices have bottomed out and could be on their way back up.
On Nov. 3, 1982, when the one-day record for an increase in the Dow industrials was set, the index was at a lower level than it is now, closing at only 1,065.49. Thus, its percentage increase then--4.2%--was much greater than Tuesday's 2.5%. In fact, Tuesday's rally was also eclipsed in percentage terms by a 38.81-point rise on Aug. 7, 1982, a 4.8% increase.
However, some market followers cautioned that one-day swings of Tuesday's magnitude are going to become even more common on Wall Street. "More investors are short-term trading oriented, and there are more buy and sell programs," said Newton Zinder, market strategist for the E.F. Hutton brokerage firm here.
He was referring to programmed sales and purchases of stock by major securities firms. The transactions, a market strategy developed in recent years, involve both stocks and stock-index futures and are triggered by price disparities between the two markets. They have little to do with the overall outlook for the market and the economy.
The trades can involve several hundred different stock issues and millions of dollars. Such "program trading" accounted for the market's accelerating gains late in the day Tuesday, many analysts said.
This year has already seen the Dow index's greatest one-day loss in history--the 39.10-point slide on Jan. 8, and its second-biggest gain. "And it's . . . only the first 2 1/2 months of 1986," Zinder remarked.
'Black Tuesday' Decline
Although the Jan. 8 market decline exceeded the 38.33-point drop on Oct. 28, 1929, it represented only a 2.5% drop compared to the 12.8% decline on "Black Tuesday" at the start of the Great Depression. Nonetheless, the sharp one-day decline in January left many investors stunned by the market's extraordinary volatility.
Tuesday's market goes into the record books in several categories. Other market indexes setting new highs included the New York Stock Exchange composite, up 2.71 points to 133.58; the American Stock Exchange index, up 3.37 to 264.15; the NASDAQ over-the-counter index, up 3.43 to 367.36; and the Standard & Poor's 500 index, up 5.11 to 231.69.
New York Stock Exchange volume Tuesday was 187.27 million shares, the fifth-busiest trading day in exchange history.
Among energy stocks, Exxon rose 2 1/8 to 54 1/2; Amoco 3 to 57 3/4; Mobil 2 5/8 to 29 1/2; Occidental Petroleum 1 7/8 to 24 7/8; Atlantic Richfield 1 3/8 to 51, and Chevron 1 5/8 to 36 5/8. In the oil service and drilling sector, Schlumberger went up 2 1/8 to 31 1/2, Halliburton 1 to 23 1/2 and Hughes Tool 3/4 to 10 7/8.
International Business Machines also rose sharply, up 3 1/2 to 152, and bank, brokerage and savings and loan stocks posted widespread gains.
Some Expect Price Drop
The accelerating strength in Tuesday's market, coming after months of spectacularly rising prices and about a week of languor, has encouraged some market-watchers to expect a long-awaited drop in stock prices. Some believe stocks have become overpriced or are near that level.
"If someone told me they'd just inherited $50,000 and asked me where to put it," said William LeFevre, market strategist for the brokerage firm of Purcell, Graham & Co. here, "I'd say I don't see how you can put it in the stock market at this level." The Dow industrials, he noted, have risen 244 points since January alone.
LeFevre said he believes that some expectations among bullish investors are contradictory. Many expect interest rates, which have dropped sharply this week, to continue falling--but also expect corporate profits to rise, an essential feature of a continued bull market.
Long-term interest rates have fallen "because of expectations of a sluggish economy," he said. "If that's so, how can you expect corporate profits to rise?"
However, many of those who expect a market downturn soon believe that it would be the prelude to a continued increase in stock prices over the longer term.