Dow Kicks Off 1988 With a Rousing 76-Point Surge : Key Banks Intervene on Dollar

Wall Street stock prices skyrocketed today in their fourth-biggest single day gain ever as investors went on a New Year buying spree.

Traders said the surge was fueled by a rise in the dollar after central bank intervention in world markets.

The Dow Jones industrial average closed 76.42 points higher at 2,015.25. Volume was 181.81 million shares.

Much of the strong advance was attributed to the dollar, which at first fell in Tokyo to quoted lows of 120.20 yen and 1.5615 West German marks but then rebounded after the Japanese, West German and Swiss central banks intervened. In New York the dollar firmed to 1.5855 marks from its Thursday close of 1.5705 marks and to 122.65 yen from 121.05 Thursday.

The intervention lifted the battered dollar well above postwar lows hit earlier in the Far East.

The customary New Year rally was broadly based, with advancing issues outnumbering declines nearly 10 to 1 on the New York Stock Exchange.

Dealers said the Swiss and West German central banks intervened on the dollar today and the Bank of Japan was said to have bought as much as $1 billion to boost the dollar from its lows.

Some dealers said they thought the Federal Reserve bought dollars in Singapore, and then again in the United States about 9 a.m. when the dollar was trading at 1.5815 marks and 122.35 yen.

Currency dealers have been looking for signs of Fed intervention to reassure them that the United States is wholeheartedly ready to defend the dollar.

Many dealers were still gloomy about the currency’s prospects. “The dollar remains under pressure. It has recuperated a bit because of heavy central bank intervention,” said a dealer with a Wall Street investment bank. “But this (move) seems temporary,” he added.

Some economists say the Fed will have to raise U.S. interest rates to push the dollar higher, despite the risk that this could tip the U.S. economy into recession.

May Have Hit Bottom

But others said they believe that after its long two-year slide, the U.S. currency may have hit bottom and that its recovery could set the stage for a new period of global economic growth.

A few economists say that, far from causing a recession, the stock market slump dating to October may have dampened an economy that was overheating and may have prodded Washington into taking necessary steps to cut the trade and budget deficits. The optimists say this could lead to steadier growth in 1988.

Share prices fell in many overseas markets in reaction to the dollar’s early slump, which is harmful to the exporting sectors of America’s trading partners.

But stock prices rallied in London on prospects of strong economic growth. The Financial Times-Stock Exchange index finished up 34.8 points at 1,747.5.

Wall Street analysts said mutual fund managers moved into the market today to invest some of the cash left on their books from 1987.

“The basic reason for the rally was cash on the sidelines. Mutual funds are at their highest liquidity since market lows of 1974 and 1982--over 11 percent,” said analyst Thom Brown of Butcher and Singer.

Brian Luedtke of Piper Jaffray and Hopwood said the new year also brought an end to selling by investors for tax purposes.