Economic, Technical Factors Push Dow Up 18.81 to Record High

NEW YORK — On the strength of positive economic news, and with futures-related trading providing some kindling, the stock market on Friday closed the books on January with another record high for the Dow Jones industrial average.

The index of leading blue chip stocks gained 18.81 points to close at 1,570.99, eclipsing its previous record of 1,565.71 set Jan. 7. None of the other major indexes set a record, however, a detail that some market followers took as a hint that the latest rally may soon run out its string.

Friday’s surge came on New York Stock Exchange volume of 143.51 million shares, up from 125.34 million on Thursday, with 1,109 issues gaining in price and 496 declining.

Wall Street professionals attributed the strong showing to two major factors. One is the prospect that the economy will strengthen in coming months. The government reported Thursday that its index of leading indicators gained 0.9% in December, the eighth monthly improvement in a row.

Although a stronger economy often forces interest rates higher, analysts noted that oil prices continued their fall Friday, a trend that may force rates down. Among other signals, crude oil futures prices on the New York Mercantile Exchange fell to $18.75 a barrel.

“Falling oil prices have a big impact, because they support the move from hard assets into financial assets, like stocks and bonds,” said Joseph D. Feshbach, technical analyst for Prudential-Bache Securities. He said the market appeared to have shrugged off the prospect that a collapse in oil prices might start a financial crisis among banks tied to the energy industry and was focusing instead on the impact of lower prices on interest rates.

The second factor is concerted buying by major institutions engaged in arbitrage trading between stocks and stock index futures.

In this case, futures contracts for such major indexes as the Standard & Poor’s 500 were trading Friday morning at sharp premiums to the indexes themselves. The March S&P;’s 500 future, for example, was trading at a two-point premium to the index. This allowed institutions to buy those stocks that match the index’s performance while selling the futures short, a maneuver that locks in the two-point gain.

“Today’s been mostly buy programs,” said William LeFevre, market analyst for the brokerage of Purcell, Graham & Co. here, referring to the institutional trades.

Many institutional money managers may have reacted to Friday’s being the last day of January. One cherished stock market totem is the so-called January barometer, which holds that the direction of the market in any year is indicated by its performance in the first month. Including Friday’s gain, the Dow was up about 24 points for the month.

Money managers who must report their investment positions on a monthly basis may have pumped some of their leftover cash into the market to bolster their monthly record.

“If January is an up month, they don’t want to have to explain why they opened February with a big cash position,” Feshbach remarked.

Among other major indexes, the NYSE composite closed at 122.13, up 1.26 points; S&P;’s 500 index closed at 211.78, up 2.45, and the American Stock Exchange index closed at 243.87, up 0.20.

Volume leaders Friday included Cigna, which recovered 3/8 to 65 3/4 after a 4 1/2-point drop Thursday, when the insurance company said it would add $1.2 billion to its property/casualty insurance reserves, resulting in an $853-million loss for 1985.

International Business Machines climbed 2 to 151 1/2. Most other blue chips followed IBM’s lead, but American Telephone & Telegraph was an exception, slipping 5/8 to 21 3/8 on volume of nearly 6 million shares. In its Friday edition, the Wall Street Journal quoted some analysts as saying they considered AT&T; stock overpriced on the basis of the company’s growth and dividend prospects.