NEW YORK — Encouraged by a tentative accord among Western countries over monetary exchange rates, Wall Street's developing year-end rally on Wednesday brought the Dow Jones industrial average over 2,000 for only the second time since the crash of Oct. 19 and to its highest point since Oct. 31.
The widely followed average of 30 major stocks rose 27.19 to close at 2,005.64. Market followers suggested that the rise was the product of increasing optimism--at least for the short term--among investors and traders. The Dow's last close over 2,000 came on Nov. 2.
"We're getting a little enthusiasm now from the firming of the dollar and the bond markets," said Michael Metz, market strategist for the investment firm of Oppenheimer & Co. Metz said he expects the market to rise by about 20% over the next few months, as professional investors begin to buy what they see as bargain-priced shares.
"All the urgent sellers have done their selling," he said. "People are looking now for a re-entry point."
Adding to the good cheer was the breadth of Wednesday's rally, which followed a loss Tuesday of about 12 points for the Dow industrials. On Wednesday, the Standard & Poor's average of 500 stocks followed by institutional investors closed at 253.16, up 3.21, and the New York Stock Exchange composite index rose 1.82 to close at 141.36. Trading volume on the Big Board totaled 203.11 million shares, compared to 195.62 million on Tuesday.
Since the Dow index closed at 1,766.74 on Dec. 4, or within 28 points of its Oct. 19 nadir, it has rallied by 239 points, or 13.5%. The move anticipates what many analysts were hoping would be an earnest traditional January rally. If the Dow remains over 2,000 for a decent interval, said William M. LeFevre, senior vice president for market strategy at Advest Inc., "I think we'll get some converts."
In part, the market may have gained some fuel from the monetary front. On Tuesday, the United States and six other industrialized countries--known as the G-7 group--said they were opposed to excessive volatility in currency exchange rates.
Although they announced no policies to prop up the dollar's sliding value, the communique was seen as at least a tentative acknowledgment that the dollar should stabilize. Such a stabilization would quiet fears of inflation and higher interest rates in the United States.
For all that, there was concern in some corners of Wall Street that the stock market's rally was yet another expression of the kind of instability that contributed to the Oct. 19 crash.
"I'm afraid this is too much too soon," said Eugene Peroni, technical analyst for the Philadelphia firm of Janney Montgomery Scott. "There's a little too much speculation."
Among other discomfiting signals was heavy buying in takeover-related stocks, one of the principal excesses thought to have contributed to the crash. Singer rose 2 to 44 after Florida investor Paul A. Bilzerian said he had financial commitments for $895 million to back his $50-a-share tender offer. A. H. Robins rose 3 1/8, closing at 19, when American Home Products offered a package of $550 million to shareholders and financing of the company's $2.48-billion trust for victims of Dalkon Shield-related injuries.