Dow Soars 46.40 to Top 2,100 in Surprise Rally

The stock market climbed sharply Friday in a robust rally that surprised traders and lured institutional investors from the sidelines.

The Dow Jones index of 30 industrials closed at 2,128.73, up 46.40 points in its largest one-day advance since June 8, when the index rose 48.36. The Dow’s gain on the week totaled 67.74 points.

Advancing issues outnumbered declines by about 15 to 4 in nationwide trading of New York Stock Exchange-listed stocks. Volume on the floor of the NYSE came to 192.34 million shares, up from 154.57 million in the previous session.

The market’s advance steadily gained momentum and breadth throughout the session, peppered with computer-triggered buying activity.

The Dow’s push above the 2,100 level at midday helped lure money from the institutional investors who had been reluctant to participate.

“We’re having a sigh-of-relief rally . . . in reaction to (Federal Reserve Board Chairman Alan) Greenspan’s speech yesterday,” said Jon Groveman, chief trader at Ladenburg Thalmann & Co. “He seems to be taking an even-keel course on tightening.”

Expected Dull Session

Recent reports showing strong economic growth raised fears in the market that the Fed would tighten credit and possibly raise the discount rate, the rate at which it lends money to banks.

“But Greenspan indicated there’s no change right now and he’s going to let things sit,” Groveman said.

The rally “took most traders by surprise,” said Hugh Johnson, senior vice president at First Albany Corp., noting that many had expected “it would be a typical summer day.”

Pointing to volume higher than the anemic levels seen earlier in the week as well as broad overall increases in stock prices, Johnson said the rally was “healthier than (those) we’ve seen recently.”

The Dow climbed more than 28 points in the previous session but the advance mostly was confined to blue chip and technology issues.

“This was encouraging market behavior (that) suggests we could break out of the malaise,” Johnson said.

With the spotlight off interest rates, investors were able to turn attention to the positive corporate earnings reports pouring in over the past few weeks. Investors had been reluctant to react to the favorable reports for fear that higher interest rates would dilute corporate profits down the road.

Analysts were optimistic that the market could build on gains in the coming week. “I love to see a rally on a Friday in the summer, because a lot of people aren’t here to participate, and hopefully the decision-makers will come back Monday and further the rally,” said Philip Puccio, a senior vice president at Dillon, Read & Co.

The Wilshire index of 5,000 equities closed at 2,702.232, up 47.70.

The NYSE composite index climbed 2.95 to 153.35.

Standard & Poor’s index of 400 industrials gained 6.68 to 313.98, and S&P;’s 500-stock composite index was up 6.00 at 272.02.

On the Tokyo Stock Exchange, the Nikkei 225-share index rose 115.54 to 27,911.63.

Prices also closed higher on the London Stock Exchange in a lazy session Friday, spurred upward by a strong start on Wall Street.

The Financial Times-Stock Exchange 100-share index closed 12.3 higher at 1,853.6.