Dow Leaps 44 to 3313 on Surge to Year’s End : Rally: In largest volume of trading since 1989, buyers seek to anticipate the market’s traditional rise in late December.
Stocks surged on the heaviest volume in three years Friday as investors sought to get a jump on an expected year-end rally.
The Dow Jones industrial average leaped 44.04 points to end at 3,313.27. Big Board volume was huge, topping 371 million shares and the highest since Oct. 16, 1989, when 416 million shares traded. Advancing issues led declines 1,302 to 566.
The rally, which began from the opening bell, took the Standard & Poor’s 500-stock index and the New York Stock Exchange composite index to record closing highs.
Analysts said the expiration of December stock index futures and options and individual equity options had contributed to the market’s gains and volume.
Phase one of the “triple-witching,” as the expiration is called, took place at the start of trading and gave the market its initial boost as buy orders poured in.
The expirations can cause heavy demand for stocks as traders who had used complicated futures and options strategies during the quarter close out those positions with actual securities.
Outside of the expiration-related activity, however, “The fact that the market is up again, and the breadth is strong, says there’s a lot of money out there from the fixed-income sector and CDs coming in,” said Gerald Simmons, head of institutional trading at Interstate/Johnson Lane.
Experts said that the market is setting up for its traditional “Santa Claus” rally.
In the last 40 years, the Dow industrial index has rallied an average of nearly 2% in the last five trading days of the year, and the advance has usually spilled over into the first two sessions of January, according the Hirsch Organization, an investment research firm in Old Tappan, N.J.
During that time, the market has failed to rise on only eight occasions.
“The year-end rally is in the cards,” said Joseph Barthel at Fahnestock & Co. “There’s a lot of year-end strength in the market.”
Analysts said stocks are prone to advance in the closing days of the year when tax-selling pressure subsides and institutional investors start to invest new money from pension fund customers.
Barthel said that the mood on Wall Street is the most upbeat in months and that the market’s ability to withstand the “destruction of IBM shares” this week says the bullish tone remains strong.
Also, President-elect Clinton may have helped the mood by emphasizing in a Wall Street Journal interview Friday that he is committed to bringing down the mammoth federal budget deficit.
The only weak spot Friday was smaller stocks, which have led the market in recent months. They took a back seat to blue chips: The NASDAQ composite index of smaller stocks added just 2.83 points to 661.29.
Among the market highlights:
* Fast-rising industrial issues included Allied-Signal, up 1 5/8 to 60 1/4; GE, up 1 1/2 to 86 3/4; 3M Co., up 2 1/2 to 103; Dow Chemical, up 1 5/8 to 58 7/8; Tenneco, up 1 5/8 to 38 3/8, and Caterpillar, up 1 3/8 to 54 1/2.
* Many technology stocks also continued to advance. Apple surged 1 3/8 to 58 1/4, Cabletron Systems gained 2 3/4 to 78 7/8, Computer Associates rose 1 1/4 to 19 3/4, and Texas Instruments added 1 1/8 to 46 7/8.
But beleaguered IBM slumped further, losing 1 5/8 to 51 3/8, a new 11-year low. Many analysts believe the stock will break 50 soon.
* Financial stocks staged a powerful advance, apparently helped by optimism that interest rates will remain stable in 1993. First Interstate Bancorp rose 1 to 47, Morgan Stanley gained 1 5/8 to 55 1/8, CNA Financial leaped 4 1/8 to 100, and General Re was up 1 3/4 to 120 1/8.
* Coca-Cola climbed 2 1/4 to 43 3/4 after the world’s biggest soft-drink company said its global sales accelerated in the fourth quarter, after a disappointing third quarter.
* Retailers were mostly higher on positive holiday sales reports. Wal-Mart, up 1/2 to 65 5/8, reached a new high, while Limited gained 1 1/8 to 28, J.C. Penney added 7/8 to 77 1/8, Walgreen rose 1 3/8 to 44 3/8, Gap added 1/2 to 33 7/8, and American Stores gained 1 3/8 to 46 1/2.
* Jostens plummeted 3 3/4 to 26 after the maker of class rings warned that its earnings for the first half of its fiscal year will be off sharply.
* Van Dorn climbed 1 7/8 to 20 3/8 on news that it is being sold to Crown Cork & Seal for $175 million.
Overseas, London’s Financial Times-100 index rocketed 49.4 points to 2,789.7, spurred on by Wall Street’s gains. The FTSE gained 73.5 points for the week.
In Frankfurt, the DAX index climbed 15.87 points to 1,492.04, a rise of 16.03 points for the week.
In Tokyo, the Nikkei index rose 242.83 points to 17,680.74, for a net gain of 239.72 points for the week.
Credit
Yields on Treasury bonds were largely unchanged or higher after a lackluster session in which many players were sidelined ahead of the holidays.
The yield on the Treasury’s main 30-year bond was 7.42%, unchanged from Thursday.
“Those are inconsequential movements,” said Lacy Hunt, chief economist at Carroll McEntee and McGinley Inc.
The Federal Reserve reported late in the day that commercial and industrial loans on the books of the nation’s large banks fell $3.24 billion in the week ended Dec. 9, excluding bankers’ acceptance and commercial paper.
That was the second consecutive weekly drop and followed a drop of $405 million in the previous week.
Hunt said the data is a signal that the economy, though recovering, remains sluggish. That is likely to soothe any continuing bondholder worries about a fast economy sending interest rates higher in the near term.
Yields on three-month Treasury bills fell to 3.20% as the discount fell 5 basis points to 3.14%. Yields on six-month bills fell to 3.40% as the discount fell 5 basis points to 3.31%. Yields on one-year bills fell to 3.66% as the discount fell 3 basis points to 3.52%.
The federal funds rate, the interest on overnight loans between banks, was 2 1/2%, down from 2 15/16% late Thursday.
Currency
The dollar edged higher in quiet trading, as slightly lower German money market interest rates weakened the mark against the U.S. currency.
German call money rates, a benchmark short-term rate, eased to 8.80% after Thursday’s 8.85%, though analysts did not see it as the beginning of major downward move in German rates.
Also, Canadian banks lowered their prime lending rates for the fourth time this week, this time to 7.75%. The Canadian dollar weakened mildly against the U.S. dollar.
The dollar closed in New York at 1.564 German marks, up from Thursday’s 1.557 marks. The dollar also closed at 123.08 Japanese yen, up from 122.84 Thursday.
Commodities
Near-term crude oil futures rallied again Friday in heavy volume on the New York Mercantile Exchange as traders scrambled to close out positions on the last day of trading for the spot January contract.
January crude oil rose 13 cents to $19.83 a barrel, while February ended unchanged at $19.90. Volume was estimated at an active 124,983 contracts.
In other commodity markets, lumber futures continued to climb, while grain markets were mixed.
Gold prices fell on the Comex, where bullion for current delivery settled at $336.90 an ounce, down $1.50 from Thursday. Near-term silver eased 0.9 cent to $3.76.
Market Roundup, D6
