Propelled by the prospect of declining interest rates, the Dow Jones industrial average broke the 3000-point mark for the first time yesterday before falling back slightly by the closing bell.
The widely known and closely watched indicator of stock market performance finished the day at 2980.20, up 10.40, after trading as high as 3002.72 in early afternoon. Trading volume was heavy, at 215.6 million shares.
But unlike the fanfare that accompanied previous landmarks -- the 1000-point level, reached in 1972, and the 2000-point level, surpassed in 1987 -- the 3000-point mark was passed relatively quietly just after 1:30 p.m.
"There was a little cheer" on the floor of the New York Stock Exchange as the big electronic scoreboards above the floor showed the Dow hitting the new high, according to a spokeswoman for the exchange.
Veteran stock traders said the mild response among brokers and customers reflects continuing worries among investors that the current run-up in the Dow is at its end.
"You wouldn't believe how little celebration" accompanied the 3000 mark, said Don Hays, a stock market analyst at the Richmond brokerage Wheat, First Butcher & Singer. "I don't think people really cared. The apathy in the stock market today is overwhelming."
"This is the most unloved, unappreciated bull market I have ever seen. Nobody trusts it," said Robert E. Brown, a market analyst at Ferris Baker Watts Inc. in Baltimore. "Everybody is thinking this thing is going to crash again."
Still fresh in many investors' minds is the crash of 1987, when the Dow lost 508 points in a single day just two months after it breached the 2000-point level. The market has since nearly doubled its post-crash low. But many investors remain skeptical.
For the week, the Dow gained 75.25 points, largely as a result of Federal Reserve Chairman Alan Greenspan's comment Thursday that the Fed would take steps to reduce interest rates, traditionally a powerful tonic for the stock market. Evidence of the Fed's actions began to surface in credit markets yesterday.
In addition, investors seem cautiously optimistic about second-quarter profits and prospects for upcoming trade and budget talks. Rising oil prices also helped boost oil company stocks, which figure prominently in the blue-chip Dow index.
"There are some good things that are happening here, and you have to ask the question, does that panoply of factors justify the rise in stock prices?" said Hugh Johnson, director of investment strategy at First Albany Corp. "My unambiguous answer is, maybe."
Johnson's tongue-in-cheek caution reflects worries among many market watchers that the rise in stock prices remains relatively narrow -- that is, concentrated among the old-line, steady-growth companies that dominate the Dow average of 30 industrial stocks. Other issues -- the majority of the stock market's population -- have not risen so sharply in recent weeks, although they also have shown gains.
For instance, yesterday's big gainers included such Dow stalwarts as General Electric, which rose $1.50 to $74.87 1/2; International Business Machines, which rose $1 to $121; and Merck, which went up 62 1/2 cents to $88.87 1/2. In addition, the NYSE's composite index rose 1.01 to 200.33, an all-time high.
But some other indicators of stock market performance have lagged the rise in the Dow. Yesterday, the Standard & Poor's industrial index gained 2.01 to 435.38, S&P's 500-stock composite index was up 1.87 to 367.31, the Nasdaq composite index of over-the-counter stocks rose 1.27 points to 468.44 and the American Stock Exchange market value index went up 1.76 to 363.99.
Consolidated volume in NYSE-listed issues, including trades in stocks on regional exchanges and in the over-the-counter market, totaled 259.30 million shares.
As usual, takeover news propelled several selected issues higher. Castle & Cooke jumped $6 to $36.50 after saying it had several suitors for its Dole fruit-packing operations, and Motel 6 L.P. posted a $2.75 gain to $22 in the wake of its decision late Thursday to accept a $22.50-a-share takeover offer from Accor S.A. of France.
Transportation stocks were particularly strong yesterday, despite news of higher oil prices that could increase jet-fuel costs for airlines. Among the airline issues gaining ground were USAir Group, up $1.50 to $25.75, and AMR, owner of American, up $2 to $63.37 1/2. Railroad issues also gained, led by CSX, which gained $1.75 to close at $36.75. The Dow transports finished up 22.63 at 1187.59.
The utility index, considered a longer-term interest rate bellwether, inexplicably failed to answered Friday's bond market rally, easing 0.31 to 206.18. The 30-year U.S. Treasury bond rose 17/32.