Stocks Greet the New Year With Broad Advances : Dow Industrials Climb 31.36 Points as Bond Market Gives Push to Rally

The stock market moved broadly upward in the year’s first trading session on Friday, driven mainly by computerized program trading and a bond market rally, analysts said.

The Dow Jones average of 30 industrial stocks closed at 1,927.31, up 31.36 points.

Gainers outpaced losers by about seven to one, with 1,479 issues up, 154 down and 270 unchanged on the New York Stock Exchange.

Big Board volume totaled 91.88 million shares, compared to 139.17 million shares on Wednesday, the last session of 1986. The market was closed on New Year’s Day.

David Jones, a securities analyst at Aubrey G. Lanston & Co., said the stock market “took off on the heels of the bond market.”

He said the bond market, which had been down in recent days, rallied as interest rates fell--and was particularly encouraged by a sharp drop in the federal funds rate, the lending rate for overnight loans between financial institutions.

That rate closed at 6.5% Friday after reaching a high of 20% for seasonal reasons earlier in the week. It ended trading Wednesday at 6%.

Analysts said the bond market gains encouraged higher stock index futures, which led to computerized program trading that drove much of the advance.

In this practice, professional traders move to profit from differences in futures indexes and their underlying “baskets” of stocks.

Bulk of Activity

Hugh Johnson, an analyst at First Albany Corp. of Albany, N.Y., estimated that program trading contributed 60% to 75% of the day’s activity.

“We didn’t notice a substantial amount of action from individuals or institutions,” he said. But, he added, “there was no question there was some of that.”

At Piper, Jaffray & Hopwood in Minneapolis, analyst Edward P. Nicoski said Friday’s market was a reversal of Wednesday’s performance, when tax-related selling dominated the market.

Much of the pre-New Year’s slide--which totaled 34.45 points in the Dow from Monday through Wednesday--was blamed on selling related to changes in the tax law, which took effect at midnight Dec. 31.

Taxes on capital gains taken in 1987 will be higher than those taken in 1986.

Nicoski said he believed that Friday’s activity included buying by investors who sold stocks for tax reasons before Wednesday, had no place to put the money, “and so they came back to put it back in.”

Public Service Co. of Colorado led the Big Board’s most active issues, up 1/8 at 18 7/8.

Bell South was up 1 7/8 at 59 5/8 and Southwest Bell was up 1 7/8 at 114 1/8.

IBM was up 2 at 122. Goodyear was up 1 at 42 7/8.

Merck was up 2 1/8 at 126, Upjohn Co. was up 2 1/2 at 95 and Warner Lambert was up 1 1/8 at 59 3/4.

Aetna Life was up 3/4 at 57 1/8, Eastman Kodak was up 5/8 at 69 and Citicorp was up 1 at 54.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 106.21 million shares.

The NYSE index was up 2.43 at 141.01.

Fewer Block Trades

A total of 1,416 blocks of 10,000 or more shares traded on the NYSE, compared to 2,100 on Wednesday.

Standard & Poor’s index of 400 industrials rose 4.65 to 274.58, and S&P;’s 500-stock composite index was up 4.28 at 246.45.

At the American Stock Exchange, the market-value index rose 4.22 to 267.49. The NASDAQ composite index for the over-the-counter market closed at 353.26, up 4.43.

The Wilshire index of 5,000 equities closed at 2,474.804, up 1.64%.

In the bond market Friday, the Treasury’s key 30-year issue rose 1 1/16 points, or more than $10.60 per $1,000 face amount. Some 30-year Treasury issues fell as much as 1/2 point on New Year’s Eve. Yields on 30-year Treasury bonds fell to 7.39% on Friday from 7.48% late Wednesday.

“A new year brings new psychology,” said Jay Goldinger, an investment banker with Cantor, Fitzgerald & Co. in Beverly Hills.

The return to more normal levels of the federal funds rate helped spur Friday’s climb, Goldinger said. Analysts said the sharp rise reflected seasonal year-end borrowing demands.

Traders thought the fed funds rate would be in the 8% range, Goldinger said, and when it instead slipped to about 6%, “it relieved a lot of pressure,” he said.

Economic News Ignored

Analysts said the market showed little reaction to government reports that construction spending fell 0.7% in November and that orders to U.S. factories for manufactured goods jumped 4.1% the same month.

In the secondary market for Treasury securities, prices of short-term governments rose about 3/8 point, intermediate maturities ranged from about 3/8 to about 5/8 point higher and long-term issues were more than 3/4 point higher, according to figures supplied by Telerate Inc.

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, rose 0.53 to 118.49. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 4.54 to 1,238.90.

In corporate trading, industrials and utilities rose 1/2 point in quiet trading, according to the investment firm of Salomon Bros.

Among tax-exempt municipal bonds, general obligations rose point and revenue bonds were up 1/8 point, Salomon Bros. said. Trading was quiet.

Yields on three-month Treasury bills were down 13 basis points to 5.54%. A basis point is one-hundredth of a percentage point. Six-month bills fell 7 basis points to 5.55% and one-year bills were off 8 basis points at 5.53%.