The stock market extended its 1988 rally Wednesday as stock prices closed higher for a third consecutive day, but confusion about the dollar's future dampened the buying spree, traders said.
The Dow Jones average of 30 industrials, up 92.67 points in the year's first two trading days, added 6.30 to close at 2,037.80.
Gainers outpaced decliners by about 7 to 5 on the New York Stock Exchange. Big Board volume totaled 169.74 million shares, down from Tuesday's 209.52 million.
The market's advance Monday and Tuesday was widely attributed to encouragement over a rebound by the dollar in foreign exchange.
The dollar's recovery continued Wednesday, bolstered in part by a Japanese television report that the United States, Japan and West Germany had privately agreed to hold the dollar within a specified range of 120 to 140 yen.
Stocks Remain Vulnerable
"There is confusion about what the dollar is going to do, and that creates confusion for those investing in stocks," said Alfred Goldman, an analyst with A. G. Edwards & Sons.
Many investors worry that the U.S. currency will not be able to sustain the gains it has made in the past three days, which were brought about by massive central bank intervention. This skepticism provided a backdrop of uncertainty over the ability of stocks to forge ahead, traders said.
Goldman said the stock market remained vulnerable to the dollar's movements.
"If the dollar started to cave in again tomorrow, it would take this market right with it again," he said.
He said central bank intervention is usually a short-term remedy to a long-term problem and does not guarantee a stable trading range.
Thomas Ryan, head of equity trading at Kidder, Peabody & Co., thought the day's showing by the Dow was good and that it boded well for the near future of stock prices.
Highest Since Oct. 19
"If we can hold in this range for the rest of the week, it would be pretty constructive," Ryan said. "We may be returning to the old 10-points-a-day move, and the market may like that."
Nevertheless, the upswing has carried the Dow industrial average to its highest levels since last Oct. 19, when it stood at 2,246.74 just before taking a 508-point drop the following Monday.
Among the most actively traded shares, IU International registered the day's best percentage gain among NYSE issues, jumping 4 5/8 to 18 5/8. Neoax Inc. began a $17.50-a-share tender offer for IU's stock.
Grand Auto, traded on the American Stock Exchange, rose 4 3/8 to 15. On Tuesday, the company said it had agreed to be acquired by Paccar Inc. for $16 a share.
DCNY Corp. rose 1 1/2 to 20. The company reported sharply higher earnings for the fourth quarter.
Among actively traded blue chips, International Business Machines gained 1 to 122 7/8; Union Carbide rose 1 5/8 to 24 3/8, and General Electric edged up to 47.
Sterling Drug added 2 to 76 3/8 on top of a 17-point jump Tuesday on word of a takeover bid from Hoffman-LaRoche.
Ashland Oil fell 1 7/8 to 54 5/8. The company said it may not have had proper approval to fill a storage tank that collapsed over the weekend, causing an oil spill in two rivers in the Pittsburgh area.
The NYSE's composite index of all its listed common stocks edged up 0.28 to 144.28.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 199.04 million shares.
Standard & Poor's index of 400 industrials rose 0.59 to 300.30, and S&P;'s 500-stock composite index was up 0.26 at 258.89.
The NASDAQ composite index gained 2.65 to 346.72. At the Amex, the market-value index closed at 275.00, up 3.23.
In foreign trading, share prices on the Tokyo Stock Exchange surged to their second-biggest daily gain, soaring 1,215.22, or 5.63%, to close at 22,790.50.
In London, the Financial Times' 100-share index rose 42.1 to close at 1,789.6.