7th-Largest Gain in History : Dow Up 65.82 as Decline in Oil Price Buoys Traders
Encouraged by falling oil prices, the stock market advanced broadly Monday in a rally that carried the Dow Jones industrial average 65.82 points to its seventh-largest gain in history.
The advance, spurred also by computer-assisted program trading, left the Dow at 1,932.86. The run-up represented a 3.5% gain for the stock average, which has risen a total of 166 points in the past six trading sessions.
The market seemed to ignore the continued slide of the dollar, which again fell to postwar lows in New York trading. Instead, investors apparently concentrated on oil prices, which slid following reports that Iraq would not participate in the Organization of Petroleum Exporting Countries’ latest plan to maintain oil production and pricing levels.
The price of oil scheduled for delivery in January skidded 87 cents a barrel to $17.44 on the New York Mercantile Exchange.
Nearly 1,300 shares advanced in price in New York Stock Exchange trading, while fewer than 400 fell. Volume was a moderate 187.69 million shares, compared to 151.68 million shares on Friday.
The Dow’s rise was its largest since Oct. 29, when the closely watched index gained 91.51. The broader market gauges followed the Dow’s lead, including Standard & Poor’s 500-stock index, which gained 6.87, moving to 242.19, and the New York Stock Exchange composite index, which was up 3.47 and closed at 135.26.
Some analysts, citing the moderate volume, said many big investors remained unconvinced by the advance in recent days and are sitting out the trading. They said the rally was ignited by program trading that came into play when stock index futures prices rose to a premium over prices of the underlying stocks.
But others were impressed by the market’s march. They said the market overcame factors that should depress prices this month, including seasonal selling of stock for tax reasons and an expected selloff of stocks by portfolio managers who don’t want to be caught heavily invested in the market at the end of such a difficult year.
“It’s pretty impressive that the market could move like this with all that going on,” said Philip Erlanger, chief technical analyst for Advest in Hartford, Conn. “The market had a lot of excuses to be nervous.”
Peter Eliades, of the Stockmarket Cycles newsletter in Los Angeles, remains bearish about the longer-term outlook for the market. “But for the short term, this makes the trend positive,” he said. “It has been a strong, broad advance.”
The decline of oil prices was considered significant by investors because such a decline would ease inflationary pressures caused by the declining dollar, analysts said. Economists are forecasting that the dollar’s fall, by making foreign goods more expensive, will add several points to the inflation rate this year and next.
Among individual stocks, Pennzoil lost 4 7/8, falling to 74 7/8. The stock had jumped 6 3/4 on Friday following news that the company and a committee of Texaco’s creditors would propose a $3-billion settlement of the firms’ dispute. Texaco, meanwhile, fell to 35 5/8.
Atlantic Richfield fell 2 to 65 3/8 as the company withdrew from a multibillion-dollar Alaska pipeline project. The company also decided to proceed with a tender offer that would raise its stake in Britoil to 29.9%.
The shares of British Petroleum, which is also seeking a 29.9% stake in Britoil, fell 1 to 54.
Airline stocks, which would benefit from lower fuel costs, rose. Allegis, owner of United Airlines, gained 1 3/8 to 70; AMR, parent of American, edged up 2 to 31 1/8; Delta added 1 1/2 to 35 5/8, and NWA, owner of Northwest, rose 1/2 to 34.
The prospect of declining inflation hurt gold stocks. Battle Mountain Gold fell 3/8 to 21, and Newmont Gold declined 1 3/4 to 41.
The stock of paper producers jumped after International Paper Co. said it would increase linerboard prices, strengthening the view that the industry will show strong earnings in 1988.
“With even modest economic growth, we expect good improvement in operating earnings over year-earlier levels,” said International Paper, whose stock finished up 3 3/4 at 43 7/8.
Great Northern Nekoosa also gained 2 to 44, Mead rose 2 1/8 to 32 1/8, Weyerhaeuser climbed 1 3/4 to 39 and Champion International added 2 to close at 33 1/8.
Technology issues were among Monday’s big winners. International Business Machines jumped 5 to 115 1/8, Digital Equipment gained 6 3/8 to 126 7/8 and Cray rose 3 5/8 to 70.
Other blue-chip gainers included General Electric, up 1 5/8 to 45; American Telephone & Telegraph, up 1 to 28 3/8, and Eastman Kodak, up 3 1/8 to 48 5/8.