Dow Soars 44 to New High in 4th-Largest Gain Ever

The stock market soared today in an extension of Friday’s strong gains, reflecting an end to last year’s tax-selling pressures.

The Dow Jones average of 30 industrials rose 44.01 to 1,971.32, topping the 1,955.57 record closing high recorded on Dec. 2, 1986, and posting the fourth-largest point increase.

The closely watched index ended Friday with a 31.36 gain.

Big Board volume totaled 181.85 million shares, against 91.88 million in the previous session.

The NYSE’s composite index rose 3.38 to 144.39.

“You had a lot of people selling for profits and then you had a lot of selling for losses and tax deductions in 1986,” explained Eldon Grimm, a stock analyst with Birr Wilson & Co. “Now you get an automatic rebound.”

“There a lot of money accumulated from people who took profits and losses (last year) and that cash is coming back into the market.”

In the closing days of 1986, there were many investors who rushed to sell their stocks to take advantage of last year’s tax benefits for capital gains as well as those who sold to deduct losses.

Traders said today’s strong market performance also reflected a healthy bond market.

Grimm said the stock market rally was “very very broad. It accompanyed all sectors here.”

“A lot of blue chips are up strongly,” he added.

Jack Baker, a stock analyst for Shearson Lehman Bros., said that many traders returned to the market today after a long holiday respite with a generally positive attitude about the prospects for economic growth and lower interest rates during the year.

In addition, he said, the market had a bullish reaction to reports about President Reagan’s health. Doctors at Bethesda Naval Hospital found and removed four apparently benign polyps from Reagan’s colon over the weekend. Reagan had entered the hospital for a semiannual post-cancer examination and for routine prostate surgery.

Bond prices were higher in light trading early today.

The Treasury’s key 30-year issue was up 1/2 point, or $5 for each $1,000 in face value, with its yield falling to 7.35% from 7.39% late Friday.

Prices for corporate and municipal bonds were unchanged to slightly higher.

The dollar’s recovery on foreign exchange markets today put traders in a buying mood, said Raymond W. Stone, chief financial economist of Merrill Lynch Capital Markets.

However, Stone, noting the light activity, said many dealers were staying away from the bond market while they await new figures indicating the direction the economy will take.

Investors generally view bearish news about the economy as good for the bond market because it could prompt the Federal Reserve Board to stimulate the economy by easing credit restrictions. Bond prices and interest rates move inversely.

In the secondary market for Treasury bonds, prices of short-term governments rose about 1/16 point, intermediate maturities rose about 5/16 point and long-term issues were up nearly 1 point, according to figures provided 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.