Dow Hits New Mark of 3,082.96 : * Stocks: The key barometer jumps 31.98, extending its Christmas-week rally. Analysts cite new optimism for an economic recovery.


In a sign that investors believe that next Christmas will be considerably cheerier economically, the Dow Jones industrial average Thursday hit a record high of 3,082.96, a gain of 31.98.

The rally was broad-based, including segments such as basic industry, media stocks and airlines, whose earnings are especially sensitive to the state of the economy. The run-up, therefore, suggests new investor confidence in a recovery next year, analysts said.

The previous record for the Dow Jones index of 30 industrial stocks was 3,077.15 on Oct. 18.

The Dow’s sharp rise was the continuation of a rally touched off last Friday, when the Federal Reserve Board, moving to jolt the economy from its torpor, dramatically lowered interest rates by cutting the discount rate--the rate it charges banks--a full percentage point. The Dow index has gained 168.60 points, or 5.78%, since the Fed action was announced.


Other market indexes also hit new highs Thursday, including the Standard & Poor’s 500-stock index, the New York Stock Exchange composite index and the NASDAQ composite index of over-the-counter stocks.

Analysts said new optimism about the economy wasn’t the only driving force. Investors big and small were rushing into stocks because falling interest rates mean declining yields on most other forms of investment, including bonds, certificates of deposit and money market funds. Investors hoping to preserve a healthy return on their capital had little choice but to bet on a rising stock market.

“It’s almost the only game in town,” said Hugh A. Johnson Jr., senior vice president of First Albany Corp. Johnson said a considerable amount of money from certificates of deposit that had matured, as well as money pulled out of municipal bonds and from corporate bonds that had been called recently, was pouring into stocks.

Post-holiday trading was light, with only 149.23 million shares changing hands on the Big Board, compared to 162.64 million in the abbreviated pre-Christmas session Tuesday.


Michael Metz, chief market strategist at Oppenheimer & Co., said investors were persuaded that lower interest rates will have the desired effect of invigorating the economy without rekindling inflation.

“Investors are giving a vote of confidence to the economic outlook by buying a lot of basic industrial stocks that will do well only if the economy does,” he said.

There were also a number of technical reasons why stocks rose sharply. Many big institutions that had been sellers completed their selling before Christmas and essentially closed up shop for the holiday, making it easy to sharply boost stock indexes on relatively light volume.

In addition, some money managers, anxious to show that they were fully invested in the rallying stock market, were pouring money in just in time for it to show up on year-end financial reports.


Abby Joseph Cohen, co-chair of Goldman, Sachs & Co.'s investment policy committee, said many individual investors, especially baby-boomers, were rethinking their investment strategy, looking to longer-term investments.

She said the rally is likely to be sustained because “we have a whole generation of people now contemplating children’s educations, their own retirements--and when individual investors think in those terms, they move to the highest-yielding investments, which are equities.”

Among the highlights:

* Citicorp ranked among the volume leaders. It was up 1 at 10 3/4 amid conjecture that it may soon be over the worst of its troubles.


* Gainers among blue chips included Philip Morris, up 2 1/8 at 76 1/4; American Express, up 1 at 20 3/4; General Electric, up 1 3/8 at 75 1/4; Boeing, up 1 1/2 at 46 7/8, and J. P. Morgan, up 2 3/4 at 69 1/2.

* Pharmaceutical stocks were strong. Merck, the biggest contributor to the Dow’s gain, rose 5 1/8 to 164; Bristol-Myers Squibb 2 1/8 to 85 7/8; Abbott Laboratories 2 1/8 to 66 7/8; Eli Lilly 2 1/2 to 84 1/8, and Glaxo Holdings 1/2 to 30 7/8.

* Mortgage-finance issues also added to their recent gains. Federal Home Loan Mortgage, up 7 3/8 at 125 3/4, and Federal National Mortgage, up 2 1/2 at 68 1/4, both hit new highs. Since the start of the week, Freddie Mac has gained 17 3/8 points and Fannie Mae 8 points.

* Technology and medical issues took a leading role as the over-the-counter market forged ahead, carrying the NASDAQ composite index ahead 9.74 points to a record 559.30. Intel rose 1 3/4 to 47, Apple Computer 1 1/4 to 53 1/2, Sci-Med Life Systems 4 1/2 to 84 and Xoma 3/8 to 20 1/4.


* Retailing issues were mixed after reports on the Christmas selling season indicated that at many stores results barely matched or fell short of very subdued expectations. Wal-Mart Stores gained 1 1/4 to 55 5/8, and Gap added 1/2 to 52 7/8, while Limited lost 5/8 to 28 5/8, and J. C. Penney slid 5/8 to 51 1/8.

Exchanges in London and Frankfurt were closed. In Tokyo, the 225-share Nikkei average edged up 93.90 points to 22,555.07.


The price of long-term bonds rose in extremely light post-holiday trading.


The Treasury’s bellwether 30-year bond rose 1/8 point, or $1.25 per $1,000 in face amount. Its yield fell to 7.50% from 7.51% Tuesday.

The bond market was closed Christmas. Many traders took an extended holiday, so there were few participants Thursday.

Economists attributed some of the gain in bonds to lower gold and oil prices, which are disinflationary. Inflation erodes the value of fixed-income securities such as bonds, so lower prices make bonds more attractive.

The federal funds rate, the interest on overnight loans between banks, was 4.375%, up from 4.0% Tuesday.



The dollar dropped sharply in light trading, weakened by expectations that it will lose more value as the American economy struggles to overcome the recession.

Markets were closed Christmas Day.

The greenback closed in New York at 126.40 Japanese yen, down from 127.55 Tuesday. It was the lowest close against the yen since the fall of 1990.


The dollar slid to 1.5075 German marks from 1.5205. The British pound fetched $1.8840, more than its $1.8735 rate Tuesday.

Other dollar rates in New York, compared to Tuesday: 1.3435 Swiss francs, down from 1.3490; 1.1605 Canadian dollars, unchanged; 5.1580 French francs, down from 5.1995, and 1,143.50 Italian lire, down from 1,152.00.


Platinum futures prices sank to a six-year low in light trading as a less rosy outlook and a weaker dollar prompted Japanese investors to unload the metal.


On other commodity markets, gold and silver futures also fell; energy futures retreated; grains and soybeans advanced; orange juice futures plunged, and livestock and meat were lower. All U.S. commodity markets were closed Christmas.

Platinum for January delivery dropped $6.80 on the New York Mercantile Exchange to $333.10 an ounce, the lowest settlement of an active, near-term contract since Dec. 23, 1985, when the December contract closed at $332.90.

Other precious metals followed platinum lower. On New York’s Commodity Exchange, December gold deliveries fell $4.60 to $354.50 an ounce; December silver slipped 0.3 cent to $3.90 an ounce.

Light, sweet crude oil for February delivery fell 47 cents to $18.50, the lowest level in 10 months; January heating oil sank 1.47 cents to 50.32 cents a gallon; January unleaded gasoline dropped .94 cent to 52.99 cents a gallon, and February natural gas fell .19 cent to $1.381 per 1,000 cubic feet. Other natural gas futures advanced.