Irrepressible Dow surges past 3,200 mark Small investors pour more money into buying binge

January 04, 1992|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

NEW YORK -- Stocks cleared another milestone yesterday as the Dow Jones industrial average broke above 3,200 for the first time on a broad-based surge fed by extraordinary demand by small investors.

It was the sixth straight record for the Dow, bringing it to 3,201.48, up 29.07 for the session, almost 100 for the week, and 300 for the past 15 days. Most other major indexes registered a similar succession of new highs.

At T. Rowe Price, the Baltimore-based mutual fund company, call volume for the week was triple the normal level, exceeding the unprecedented activity registered during the 1987 stock market crash. A spokesman, Steven Norwitz, said investors were placing new money into funds as well as shifting existing holdings away from low-yielding money-market accounts into stock funds and even "junk bonds."

"Stocks right now are being perceived as the only game in town," concluded Leo Grohowski, managing director of Marinvest Inc. With money pouring into mutual funds and mutual funds pouring the money into the stock market, the rally is "feeding on itself," he added.

The Christmas rally began Dec. 20 when the Federal Reserve Board aggressively cut interest rates. It has subsequently shrugged off innumerable negative reports on the underlying economy and corporate profits, as well as historical benchmarks concerning fair value.

"People can't wait to get into this market," said Robert Moseson of Performance Analytics Inc. in Chicago. "Three percent or 4 percent [available on savings accounts or safe short-term government securities] is better than losing money, but that's not what people are thinking."

Volume on the New York Stock Exchange was a robust 224.3 million shares yesterday, and roughly two issues rose for each that fell. The gains were broadly spread among long-time market favorites like Coca Cola and Merck, as well as other companies that have been badly bruised by the recession, such as airlines and banks.

Most notable among the previously decimated were the three major automobile manufacturers, all of which have been pounded by extraordinary losses and face continued problems until the economy revives.

General Motors climbed 1 5/8 , to 32 1/2 ; Ford Motor 1 1/8 , to 30 3/8 ; and Chrysler 7/8 , to 13 3/8 .

"The market always discounts improvements well ahead of when they occur," said Paul Kronlokken, an analyst with Piper Jaffray & Hopwood Inc. in Minneapolis. "The economy may turn next quarter or the middle of the year, but right now the market is saying it will turn sooner rather than later."

Given the numerous uncertainties, though, others warned that the current rally may be unsustainable. "Unless we have a good jolt to the economy in the second half of the year that produces good profits, the stock market will be in trouble," predicted Brian Fabbri, chief economist at Midland Montagu.

Primary contributors to the Dow's gain included Walt Disney, up 3 1/8 at 119; Coca-Cola, up 3 at 83 1/4 ; Merck, up 2 1/2 at 168 7/8 ; and Goodyear Tire & Rubber, up 1 3/4 at 55.

Chemical Banking, which has just completed its merger with Manufacturers Hanover Corp., gained 1/2 , to 23 7/8 .

Health-care and biotechnology stocks posted some of the standout gains in the over-the-counter market as the NASDAQ composite index climbed 6.20 points to a record 592.65.

U.S. Healthcare rose 3 1/8 , to 43 3/4 ; Liposome Co. 2 7/8 , to 19 3/8 ; and SciMed Life Systems 8 1/4 , to 90 1/2 . U.S. Healthcare said an agreement had been reached with state officials on a first-quarter premium rate increase for its New York health management organiation.

Airline issues continued to get an economic-recovery play in Big Board activity. Delta Air Lines gained 2, to 68 1/4 ; UAL 5/8 , to 145 1/4 ; and AMR 2 1/8 , to 71 5/8 . AMR shares, which traded as low as 39 3/4 a little over a year ago, hit their highest levels since 1989.

The Associated Press contributed to this article.

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