Can Market Sustain 3,000-Level? DOW JONES INDUSTRIAL AVERAGE

Article excerpt

THE eyes of Wall Street are now riveted on the Dow Jones industrial average - and the dizzying heights of a landmark 3,000-point Dow.

Never, in numerical terms, has the average of 30 major companies on the New York Stock Exchange advanced so high. But there is a risk the Dow will then flounder around that level for the rest of the year - or even fall back downward in a retreat.

"A number like 3,000 clearly has a deep psychological impact," says Larry Wachtel, a vice president of Prudential Bache Securities. But far more important than the number, says Mr. Wachtel, "is the underlying momentum of the market."

Some companies are reaching new highs in terms of their own stock value, says Wachtel; the important Dow Jones transportation average, which in part reflects the shipment of goods across the nation, shows signs of new strength; and finally, the trading volume of stock shares has been increasing in recent days. Such indicators taken together, says Wachtel, suggest "underlying strength for the stock market in general."

The Dow briefly flirted with a 3,000-point high Friday and stayed above that level most of Monday. But the well-known stock market barometer weakened in the afternoon, closing at 2,999.75, its third straight record high.

Analysts here say that the momentum behind the recent rise of the Dow is linked to elation that the Federal Reserve Board had decided to ease interest rates, even if only slightly.

Early last week Federal Reserve Board Chairman Alan Greenspan told Congress that the Fed was ready to ease rates to prevent tightening credit conditions faced by small and medium-sized businesses.

Some businessmen complain that banks have over-tightened eligibility requirements to obtain loans. Thus, on Friday, the Fed slightly eased rates.

Many stock analysts, particularly those who recall the relentless march of the Dow toward the 2,700 level back in the summer of 1987 - before the market crash in October of that year - say that getting into the lofty 3,000 stratum is somewhat scary.

"You have to look at the stock market at this point in two ways," says Dennis Jarrett, senior vice president with Kidder, Peabody & Company. …