NEW YORK -- Stocks rallied to record highs yesterday amid gains in oil shares brought on by an analyst's forecast that OPEC would reduce production.
Reports that consumer spending rose during Christmas, providing evidence of a stronger economy, and record-setting rallies in the German and French stock markets also fueled the U.S. market's rise.
"The economy seems to be in good, sound shape," said Jeffrey Shames, chief equity officer at Massachusetts Financial Services Boston, which manages $35 billion in assets. "It's a very benign environment" for stocks, he said.
The Dow Jones industrial average jumped 35.21, to 3,792.93, topping its record close of 3,764.43 on Dec. 13. Caterpillar Inc., International Paper Co. and General Motors Corp. led the advance.
Standard & Poor's 500 Index climbed 3.16, to 470.54, breaking its Oct. 15 record of 469.50.
Among other market measures, the American Stock Exchange Market Value Index rose 1.84, to 467.16. The Nasdaq Composite Index rose 2.36, to 761.06, fueled by gains in Intel Corp., Amgen Inc., Applied Materials Inc., Apple Computer Inc. and Nordstrom Inc.
Trading was slowed by the Christmas-to-New Year's holidays. New York Stock Exchange trading totaled 171 million shares, down from 227.2 million Thursday and the lowest since the day after Thanksgiving.
Almost 11 stocks rose on the New York Stock Exchange for every seven that declined.
The Dow Jones transportation average gained 9.01, to 1,770.47, below the closing record of 1,771.95 set Dec. 13, as Federal Express Corp., UAL Corp. and Delta Air Lines Inc. advanced.
Oil stocks climbed as Oppenheimer & Co. raised its ratings on Mobil Corp., Royal Dutch Petroleum Co., Texaco Inc., Atlantic Richfield Co. and Amerada Hess Co.
Analyst Paul Ting said he believed the Organization of Petroleum Exporting Countries was ready to cut production as much as 1 million barrels a day. OPEC members produced 24.6 million barrels a day during November.
"We're talking about a potentially significant surgical cut," Mr. Ting said. "A cut of 200,000 barrels a day would not be meaningful."
If OPEC reduced daily output by 1 million barrels, crude prices could rise to $17 a barrel, the analyst said. Crude oil for February delivery settled yesterday at $14.13, down 35 cents.
Mobil rose $1.125, to $78.375; Royal Dutch gained 87.5 cents, to $106.625; Texaco was up 37.5 cents, at $64.375; Atlantic Richfield advanced $1.50, to $105.25; and Amerada Hess added $1, to $45.625. Exxon Corp. rose $1.25, to $64.25.
"It will be interesting to see if oils stay up and give leadership to the rest of the market," said Dale Tills, manager of institutional equities trading at Charles Schwab Corp. in San Francisco. That would help bolster some investors' view that stocks will gain in January, he said.
Gains in consumer spending reinforced a picture of economic recovery. A late burst of spending before Christmas goes along "with the scenario of the economy doing better and consumers having a bit more money to spend," said Richard Ciardullo, head trader at Eagle Asset Management, which manages about $6 billion in St. Petersburg, Fla.
Last Thursday, the Commerce Department said durable goods orders in November rose 2 percent, the fourth consecutive monthly advance, as U.S. automakers said mid-December sales grew between 21 percent and 44 percent. Consumer confidence also improved in November as personal income and spending both expanded.
Holiday sales matched retailers' expectations, with analysts saying sales grew from 4 percent to 5.5 percent from last year.
Nordstrom Inc. rose $1.25, to $33.75; J. C. Penney Co. advanced 75 cents, to $54.50; and Woolworth Corp. gained 12.5 cents, to $24. Elsewhere, May Department Stores Co. fell 75 cents, to $39.25; Kmart Corp. dropped 50 cents, to $21; and Dillard Department Stores declined 37.5 cents, to $35.375.
Meanwhile, German and French markets surged amid continued optimism about declining interest rates and chances for European economic recovery in 1994. Germany's DAX Index climbed 1.4 percent, to a record 2,253.98, while France's CAC 40 jumped 1.11 percent, to 2,276.55. British markets were closed until Wednesday for the holidays.
Investors also grew more confident as a result of the Federal Reserve Board's announcement Thursday that its policy-making
committee voted at a Nov. 16 meeting to keep a neutral stance on interest rates.
"That gives people a little bit of confidence" that the Fed is "not going to tighten as early as people were thinking," said Phillip Krauss, assistant manager for equity trading at Kemper Financial Services in Chicago.
Long-term interest rates rose slightly yesterday; the yield on the benchmark 30-year Treasury bond climbed to 6.22 percent from 6.21 percent Thursday.
Along with oil stocks, shares of drug, utility, household product and paper companies paced the day's advance.
Paper stocks rallied after Merrill Lynch & Co. said prices for lumber and other wood products remain strong, "which should result in near-record wood products earnings" in the fourth quarter. Last week, Georgia-Pacific Corp. said fourth-quarter earnings would be weaker than expected, driving down its stock by 5.2 percent.
Georgia-Pacific surged $1.75, to $69.75; International Paper Co. advanced $1.50, to $68.25; and Louisiana-Pacific Corp. rose $1, to $40.625.
America West Airlines Inc. climbed 43.75 cents, to $1.46875. The carrier, operating under bankruptcy protection, said Thursday that it received a proposal for investor Michael Steinhardt to invest up to $250 million in exchange for 80 percent of the airline's voting equity.
Amgen Inc. rose $1.50, to $48. Investors might be undervaluing shares of the biotechnology company, which has a strong product line, Barron's magazine reported.
Telefonos de Mexico S.A.'s American depositary receipts, each representing 20 Series L shares, rose $1, to $466. The Mexican telephone monopoly said it increased some of its telephone rates.
PetsMart Inc. rose $2.50, to $27.50. The pet food retailer was added to the "recommended list" at Donaldson, Lufkin & Jenrette.