Four-digit fever has swept Wall Street periodically since Dec. 31, 1976, when the Dow Jones average of 30 leading industrial stocks last cracked the 1,000-point level. But rarely had an assault on the magic barrier been more furiousor inconclusivethan the trading melee that last week nudged the Dow briefly, and by the barest fraction, into quadruple digits.
Having surged powerfully upward since the election, the Dow hung tantalizingly just below 1,000 throughout much of the week, then finally squirted to 1,000.17 in an avalanche of late buying at the close of business Thursday. On Friday, reports of a three-quarter-point rise in the prime rate helped push the market down 10.24 points to close at 989.93.
In fact, the real surprise was not the rise in the Dow, which has climbed by 53 points on the New York Stock Exchange since Nov. 3, but the unprecedented volume of trading. During the week, a record 306 million shares changed hands on the Big Board alone, helping to push annual volume past 10 billion for the first time in the exchange's history.
One reason for the waves of big-volume trading was that cash-rich institutional investors such as insurance companies, pension funds and mutual funds have lumbered back into the market after months of sitting on their wallets while awaiting the outcome of the presidential race. Says Kenneth Rolland, an executive vice president of New York's Chemical Bank: "People think a Reagan Administration will cut Government spending and institute tax reforms that will stimulate investment and savings. Investors believe that the climate will be very good for financial assets like stocks." Adds Investment Strategist David Bostian of Bostian Research Associates: "In March you could not convince people that the Dow would ever go above 800. Now you cannot tell them that it will drop below 950."
Just as has been the case all year, the hottest stocks were in the three areas that hold out the most promise for rapid growth and high profits in the energy-scarce, tension-riddled 1980s: oil, defense and high technology. With petroleum prices once again rising, Exxon shares leaped to an alltime high of $87.75, while Royal Dutch Petroleum, another big gainer, rose to a record $111.50 a share but lost a few points at week's end. Raytheon, a major defense contractor whose stock has nearly doubled in value during the year, closed the week at $110.75.
As difficult as it was for the market to breach 1,000, many investment analysts last week were cautioning that further rises could prove even more elusive. In January of 1973, the Dow rose to an alltime high of 1,051, shortly thereafter to tumble 500 points into Wall Street's worst bear market since the 1930s. Now, many of the investors who took a beating in the 1970s are selling out, instead of buying, as the market moves back up.