Dow Soars 18.12 to Set 1st 1986 Record; Other Indexes Reach Highs

NEW YORK —  The stock market charged upward Tuesday with stock prices reaching record levels on several Wall Street barometers as the market’s historic 1985 rally continued into the new year with vigor.

The Dow Jones average of 30 industrials rose 18.12 to a record 1,565.71, shattering the old high of 1,553.10 set on Dec. 16.

Gainers outpaced losers by about three to one on the New York Stock Exchange. Big Board volume totaled 152.95 million shares, against 99.61 million on Monday, for the 23rd most active day in NYSE history.

In addition, the NYSE’s composite index set a new record and the American Stock Exchange’s market value index and NASDAQ composite index for over-the-counter securities surpassed 2 1/2-year-old records.

Analysts credited the rally--which followed a quiet, generally sluggish session on Monday--to continuing confidence over subdued inflation, plus a strong rally in the bond markets.

Bond prices staged a surprising rally, and analysts said the market may have been reacting in part to a report that the Japanese government wants the Federal Reserve to push down U.S. interest rates.

Plenty of Punch Left

Other observers noted that, although the market was lower overall on Monday, stock prices had turned upward at the end of that session. The late strength apparently convinced many traders that the market still had plenty of punch and would not embark on a prolonged decline in the near future.

“People saw a test of the market at a point where everyone probably was back from the holidays,” said Monte Gordon, vice president of research with Dreyfus Corp. in New York. “Now they’re convinced that nothing material has changed, so now they’ve picked it up and they’re rolling with it.”

In addition, some analysts speculated that many institutional investors who received fresh injections of money at the beginning of the year decided to join in on the rally.

“The market took off and, ‘monkey see monkey do,’ a bunch of guys with excess cash don’t know what to do, so they throw it in,” said William LeFevre of Purcell, Graham & Co. in New York.

Jack Eckerd Corp. led the list of most active issues on the New York Stock Exchange, rising 1/2 to 30 1/2 as 3 million shares changed hands. Merrill Lynch Capital Partners said it had reached agreements for all the financing needed to undertake the previously announced leveraged buy-out of the company.

Pennzoil, Texaco Talk

Pennzoil soared 19 3/4 to 83. Late-afternoon trading in Pennzoil was halted temporarily because of an imbalance in buy and sell orders blamed on rumors that the company had settled its multibillion-dollar lawsuit against Texaco by agreeing to be absorbed by Texaco. Late in the day Pennzoil said it had rejected a proposed settlement by Texaco.

Texaco fell 1/2 to 30 3/4 in heavy trading.

SCM Corp. was up 2 1/2 to 74 3/4. Hanson Trust PLC said it was proceeding with its $75-a-share hostile takeover bid after a federal appeals court on Monday blocked the use of an anti-takeover provision by a group led by Merrill Lynch.

Financial issues benefited from the drop in interest rates. Chase Manhattan was up 3 7/8 to 77 1/8; H. F. Ahmanson rose 3 to 53 1/2; Citicorp was up 2 3/8 to 53 3/8; Manufacturers Hanover rose 2 1/2 to 49, and Great Western Financial was up 2 to 36. Earlier in the day, Ahmanson strongly denied a rumor that General Motors is interested in buying it.

Actively traded blue chips included IBM, up 1 to 155 5/8; AT&T;, up 3/8 to 25, and Union Carbide, down 1 1/2 to 73.

A new American Stock Exchange volume record of 23.83 million shares was set with the help of a 10-million-share block trade of Wang Laboratories Class B stock. The block of Wang Laboratories, which was up 1/2 to 19 5/8 on the day, was a primary offering of the shares.

The block helped the AMEX top its Feb. 6 volume record of 19.1 million shares, and it was the largest block trade in AMEX history, surpassing a 6-million-share trade of BAT Industries stock last Feb. 6.

The NYSE’s composite index of all of its listed common stocks rose 1.76 to 123.14, topping the record of 121.90 set on Dec. 16.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,194, compared to 1,839 on Monday.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 185.6 million shares.

Standard & Poor’s index of 400 industrials rose 3.30 to 237.02, and S&P;’s 500-stock composite index was up 3.15 to 213.80.

At the American Stock Exchange, the market value index closed 2.52 higher to reach a record 249.89, topping the old high of 249.03 set on July 26, 1983.

The NASDAQ composite index for the over-the-counter market closed at a record 329.74, up 3.75. The previous NASDAQ index closing was 328.91 on June 24, 1983.

Low Yield

In the credit markets, the Treasury Department sold $6.5 billion in seven-year notes at an average yield of 8.85%, the lowest yield in more than seven years.

Traders had expected even stronger participation in the bond auction, but the showing did not hold back the broad rally, said Robert G. Dederick, chief economist of Northern Trust Co. in Chicago.

The market seemed to be stimulated by an unconfirmed report that the Japanese finance minister would visit the United States to ask the Fed to lower U.S. interest rates, Dederick said. Japan needs lower domestic interest rates to stimulate internal growth.

Other factors in the rally in Treasury securities may have been a spillover from the strong performance of municipal bonds, good news on falling oil prices and a continued softening of the federal funds rate, which is the interest rate on overnight loans between banks, Dederick said.

The Treasury is scheduled to sell $4.75 billion of new 20-year, one-month bonds today. Traders were also awaiting government figures on December unemployment, which are to be released today.

In the secondary market for Treasury securities, prices of short-term governments rose 3/16 point from late Monday, intermediate maturities rose by between 11/32 point and 13/16 point and long-term issues were up 1 7/16 points.