Bargain Hunters Lift Dow 16.25, Index Ends Just Below Year’s High
A year-end search for bargains among blue chip issues propelled stock prices to a broad rally on Thursday that left the market’s best-known gauge only a shade below its highest closing level this year.
The Dow Jones index of 30 industrials, which gained 3.75 points on Wednesday, climbed another 16.25 to close at 2,182.68.
That was less than a point below its 1988 closing high of 2,183.50 reached on Oct. 21, which also was the highest close since the October, 1987, crash.
At mid-afternoon, the blue chip index was slightly above the year’s high closing mark but it lost some ground by the end of the session.
As the market heads into its final trading session of the year, the Dow Jones industrial index is about 12.6% above its 1987 close of 1,938.83.
Advancing issues outnumbered declines by about 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks.
Big Board volume swelled to 131.29 million shares, up from Wednesday’s 110.63 million.
Analysts said year-end bargain hunting was mainly responsible for boosting prices.
Michael Metz, market analyst for Oppenheimer & Co., said most of the institutional investors who wanted to sell have already done so. “So when you get some nibbling by bargain hunters, it is easy to lift (the Dow Jones industrial index) with no supply around,” he said.
Brokers also said the year-end buying was encouraged by a rally in the prices of Treasury securities. Treasury bill rates had jumped earlier in the week, luring investors away from the stock market.
“We could work our way higher over the next couple of days. The market’s been in a mood to move higher. The key has to be that bonds at least hold up,” said James McCarthy, a technical analyst with Paine Webber Inc.
Brokers also partly attributed the advance to seasonal strength and said futures-related buy programs lifted the market in early trading.
Thursday’s blue chip gains marked the culmination of a steady advance in stock prices since November. The stock market has historically moved higher as the end of the year approaches and buying usually spills over into January.
“It’s the January effect in December,” Peter Vandenberg, a Shearson Lehman Hutton vice president, said of the rise. “Bonds are a little better and tax-selling has abated,” he added.
Bullish sentiment was also helped by a softening in oil prices, which had risen earlier in the week.
“We’ve been up for five or six weeks, the market consolidated, and now it’s broken out,” said Donald Kimsey, senior market analyst with Dean Witter Reynolds.
Analysts also said the gains also reflected efforts by some institutional investors to spruce up their end-of-year portfolios or put some excess cash to work by adding some top-quality issues.
“With the market near its highs for the year, the large cash position that some money managers find themselves with is embarrassing,” said Newton D. Zinder, senior vice president at Shearson Lehman Hutton Inc.
He said the gains also demonstrated relief that the stock market held its ground earlier this week despite rising interest rates.
In London, stocks ended near the day’s high, helped by the gain on Wall Street. The Financial Times 100-share index ended up 15.7 points at 1,803.4.
The Tokyo Stock Exchange closed for the year Wednesday. It will begin the new year with a half-day session Jan. 4.