Stock prices ended on a positive note Friday, closing out a choppy week with a solid gain pinned on hopes that interest rates are headed lower and inflation will remain in check.
Trading was active, supported by the continuing bond market rally, but with special attention focusing on issues due to pay dividends soon.
The Dow Jones index of 30 industrial stocks closed at 1,958.22, up 28.18 points. For the week it rose 54.17 points, regaining the previous week's 52-point loss and setting the stage for a run to the 2,000 mark.
Advancers outnumbered decliners by about 5 to 2 on the New York Stock Exchange.
Big Board volume totaled 211.88 million shares, of which five dividend-related issues accounted for more than 60 million shares.
Blue chip, transportation and utility sectors displayed strength. Technology issues lagged.
"The market was driven by lower interest rates and the idea that inflation is under control," said Peter DaPuzzo, head of retail equity trading at Shearson Lehman Hutton.
Market analysts said higher bond prices--an impressive 3-point rise in three days--reassured equity investors that the pain of a slower economy will be partly offset by lower interest rates.
Speculation that banks might soon be prompted to lower their prime rates from the current 8.75% prevailing since November also injected a positive note into the stock market.
Moving in Wide Range
While the market closed with a good gain, its movement during the week was choppy as investor attention shifted from concern about slow growth in the quarter to the prospect of lower interest rates.
Shearson's DaPuzzo said his firm believes that the market is moving in a wide range between 1,800 and 2,200 on the Dow.
"The market seems to have enough strength to reach the north side of 2,000 in the very near future," DaPuzzo said. "Then it will have to keep exploring to see whether it can inch its way up."
DaPuzzo said strength in the transportation group Friday aroused buying interest among investors who follow the so-called Dow theory.
Friday marked the last trading day of January, and--in an appropriate reflection of the month's volatility--it took the session's performance to determine whether the month would end up a net winner or loser for some of the leading market indicators.
Some Wall Streeters like to keep track of that result, dubbed the "January Barometer," as a harbinger for the rest of the year.
Yale Hirsch, writing in the 1988 Stock Trader's Almanac, says that in 32 of the last 37 years--or 86% of the time--the market has basically followed suit with upward or downward moves in the Standard & Poor's composite index for January.
"However, there were no errors in odd years when new Congresses convened," he said.
The result this year? A net 9.99-point gain from Dec. 31 through January in the Standard & Poor's composite index.
Bank Issues Jump
The Dow Jones industrials also showed a net gain--19.39 points--over the month.
Many interest-sensitive issues showed healthy gains.
Among banks, Chase Manhattan was up 1 3/4 at 22 7/8, J. P. Morgan rose 3 1/8 at 37 1/8 and Morgan Stanley picked up 7/8 at 50.
Even so, some analysts said they doubted the market's conviction, because of continuing worries that the economy may well be headed for slower times.
"It's nice to see lower interest rates, but the background music along with the lower rates is keeping institutional investors on the sidelines," said Hugh Johnson, senior vice president at First Albany Corp. in Albany, N.Y.
"Encouragement about the bond market has not been enough to push investors off dead center, or get them off the fences, because there's so much nervousness about the economy," he added.
Dividend-related shares were particularly active during the session.
Among these, Tenneco led the Big Board's most-active list, up at 40; Public Service of New Mexico was up at 22; American Electric Power was up 7/8 at 29 3/4; Union Carbide was unchanged at 20 3/4, and Merrill Lynch gained 3/4 at 24.
Computer Stocks Mixed
Among other issues, oils were strong, with Amoco up 1 3/8 at 74 3/4, Atlantic Richfield up 1 3/4 at 74 7/8 and Mobil up 1 1/8 at 44 1/8.
IBM was down 1 3/8 at 112 3/8, Digital Equipment dipped 1/8 to 123 3/8 and Honeywell was up 3/4 at 61 1/2.
Federated Department Stores, target of a $4.2-billion takeover bid by Campeau Corp., was up 2 7/8 at 53 7/8.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 250.92 million shares.
The NYSE composite index was up 1.91 at 144.13.
Standard & Poor's index of 400 industrials rose 3.95 at 293.70, and S&P;'s 500-stock composite index was up 3.78 at 257.07.
At the American Stock Exchange, the market-value index rose 1.97 to 269.10. The NASDAQ composite index for the over-the-counter market closed at 344.66, up 2.30.
The Wilshire index of 5,000 equities closed up at 2,517.808, up 30.157.
In foreign trading, London share prices rose in reaction to the NYSE'S advance Thursday. The Financial Times 100-share index closed up 6.9 points at 1,790.8.
On the Tokyo stock exchange, the Nikkei 225-share index rose a modest 35.07 to 23,622.32.