NEW YORK — With good economic news proliferating and the prospect of inflation receding, the stock market reached record highs Monday for the second session in a row. The Dow Jones industrial average of leading blue-chip stocks rose 23.28 points to close at 1,594.27.
It was the largest daily rise since an increase of 23.97 points Dec. 13.
The market's sharp rise Monday was fueled, as was the case with Friday's 18.81-point jump, by concerted buying by institutions playing the stock market against the stock index futures market. But traders also were reacting to an abundance of indications that the fundamental economy is strong.
As trading opened Monday morning, for example, the Commerce Department reported that new factory orders increased 2.7% in December, the strongest gain in more than a year. This came on top of a weekend report by a group of industrial purchasing executives that the economy showed "persistent strength" in January.
The rally picked up steam around 1 p.m., moreover, when General Motors reported an unexpectedly large profit of $3.85 per share for the fourth quarter ended Dec. 31, up from $2.76 a year earlier. The company's stock rose 2 points Monday to close at 76.
"GM's the king of the manufacturers," said William M. LeFevre, market analyst for Purcell, Graham & Co. LeFevre added that the broad strength in the market suggested that "she's got to run a ways before she pauses again."
United Technologies--a company whose stock, like that of GM, is one of the Dow Jones 30 industrials--rose 2 to 49 1/8. The firm announced that it plans to buy back up to 10 million of its shares in the open market.
Energy Stocks Slide
International Business Machines climbed 3 1/8 to 154 5/8, General Electric 1 7/8 to 72 3/4, McDonald's 1 3/8 to 81 and Minnesota Mining & Manufacturing 1 1/8 to 92.
Energy stocks were mostly lower on news of the drop in oil prices. Amoco lost 1 3/8 to 55 1/2, and Schlumberger was down 1 1/8 at 32.
Beatrice Cos. rose 1 3/8 to 45 1/8. The company announced Sunday that it had reached a new buy-out agreement with the investment firm of Kohlberg Kravis Roberts & Co.
Volume on the New York Stock Exchange was 145.28 million shares, compared to 143.51 million on Friday. The number of rising stocks outnumbered those that declined by more than two to one.
Expectations that inflation will remain low and interest rates will fall were encouraged by a drop in the price of gold, which fell $5 to $343.70 on the Commodity Exchange in New York.
The robustness of the stock market so far in 1986 has turned some of the most reluctant strategists into believers.
"It's humbled, if not humiliated, most forecasters, including this one," said Michael Metz, chief market analyst for Oppenheimer & Co. Still, many professionals note that Wall Street people historically fall into consensus just as the market prepares to prove them wrong.
Indexes Set Records
Market indexes reaching new highs were the Dow Jones transportation average, up 7.83 to close at 756.29; the NYSE composite index, up 1.16 to close at 123.29; the NASDAQ over-the-counter composite, up 1.69 to close at 337.46, and the Standard & Poor's 500 index, up 2.18 to close at 213.96.
A notable exception was the American Stock Exchange index, which is heavily weighted toward energy stocks and thus has been reflecting the fall in oil prices. The Amex index closed at 243.08, down 0.79.
Many professionals argue that the rally has been supported less by expectations that corporate profits will appreciably improve--one traditional fuel of bull markets--than by the shrinkage of available stocks resulting from last year's multibillion-dollar merger wave.