Late profit-taking spoiled a pre-Christmas rally in blue chips, but most other stocks closed higher Thursday, thanks to strength in bond prices, more upbeat numbers on the economy and traditional year-end buying.
The Dow Jones Industrial Average was above its all-time record for most of the day but closed down 4.47 points at 3,757.72. That was still the third highest close on record.In the broader market, the Santa Claus rally held firm.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, with 1,254 up, 836 down and 637 unchanged.
Big Board was 227.18 million shares as of 4 p.m., down from 267.07 million on Wednesday. Analysts said the light volume exaggerated swings in the Dow.
The Standard and Poor's 500-stock index was up 0.06 to 467.38. The Nasdaq index gained 2.63 to 758.70.
The NYSE's composite index was up 0.34 to 258.49. At the American Stock Exchange, the market value index was up 2.49 to 465.32.
"There was some profit taking, but you still had a fairly decent positive advance-decline line. It was just a few of the Dow stocks that were hit," said Michael Metz, investment strategist for Oppenheimer & Co. in New York.
Robert L. Kahan, manager of equity trading at Montgomery Securities Inc. in San Francisco, it was a "typical year-end rally," despite the decline in the Dow.
Investors who had sold off for tax purposes or other reasons had mostly finished their job before the day began, depressing some prices and leaving bargain hunters to jump in, he said.
On the economy, orders to U.S. factories for durable goods jumped 2 percent in November, the fourth straight advance that marked the longest string of gains in more than six years, the government said.
Personal income rose 0.6 percent in November, the fourth straight increase. At the same time consumer spending grew 0.4 percent, the eighth straight advance. The fact that income grew faster than spending is encouraging to economists who worried that lagging income growth earlier this year would eventually curb spending and slow economic growth.
Bond prices closed higher for the second day in a row, to the surprise of some investors who expected Wednesday's rise would be a short-lived result of speculative strategies. Treasuries were weak in early going Thursday but finished stronger in an abbreviated session.
Stock investors like the lower yields that accompany higher bond prices. Low interest rates make stocks more enticing than lower-risk investments and they also help corporate profits.
To Kahan, the economic picture was familiar.
"It's what we've said before, a slowly recovering economy, a low inflation rate, low interest rates. That appears to be the environment we'll have as we move into 1994."
Blue chip issues that helped send the Dow downward included Minnesota Mining and Manufacturing, down 11/2 to 1087/8; IBM, down 5/8 to 585/8 and General Motors, down 3/8 to 551/4.
Technology issues helped strengthen the Nasdaq. Chip maker Intel was up 3/8 to 621/8 while personal computer maker Sun Microsystems gained 5/8 to 285/8. On the NYSE, Motorola gained 11/4 to 901/4.
Broderbund Software, another Nasdaq stock, was off 6 to 341/2 despite first-quarter earnings report in line with expectations. Alex. Brown & Sons downgraded the stock to neutral, from buy, lowering its estimate of annual earnings amid doubts about revenue growth.