Volcker’s Hints That Credit May Ease Spurs Rally; Dow Gains 20.76

NEW YORK —  The stock market scored its best gain since mid-December on Thursday as Wall Street’s belated New Year’s rally continued through its fourth straight session.

Analysts said the gain drew much of its momentum from comments by Federal Reserve Chairman Paul A. Volcker that seemed to indicate his willingness to further ease credit conditions.

The Dow Jones average of 30 industrials climbed 20.76 to 1,223.50, bringing its gain for the past four sessions to 38.54 points.

In addition to being the market’s best day since the Dow Jones industrials rose 34.78 points on Dec. 18, it was the busiest of 1985 to date. Volume on the New York Stock Exchange reached 124.68 million shares, up from 99.23 million Wednesday.

This week’s gains have more than offset a drop of 26.71 points in the Dow over the first three sessions of 1985. In effect, the market waited until hopes had faded for a rally to start off the new year before staging one.

Falling Interest Rates Cited

The upswing in stock prices has been attributed largely to falling interest rates and hopes for some further easing of the Federal Reserve’s credit policy.

Rates backed up a bit in the credit markets Thursday as investors awaited the Fed’s weekly figures on the money supply, issued after the close. The data showed a $500-million drop in the basic money supply for the week ended Dec. 31.

Prices of long-term government bonds, which move in the opposite direction of interest rates, fell $3.75 for each $1,000 in face value after the money supply figures were released.

But stock traders apparently focused on news reports about Volcker, who said in a luncheon speech in Washington that he believed continued progress was being made against inflation.

Volcker cautioned that he was not “declaring victory” over inflation, but he said the U.S. economy could be on the verge of a new era of stability and long-term economic growth.

Wall Streeters evidently took that as a signal of Volcker’s willingness to consider relaxing credit conditions in the future.

Ford Raises Dividend

Blue-chip stocks leading the market higher included International Business Machines, up 3 3/8 at 123 3/4; American Telephone & Telegraph, up 5/8 at 20 3/4; General Motors, up 2 at 79 5/8, and Ford Motor, up 1 3/4 at 46.

Ford raised its quarterly dividend from 40 cents to 50 cents a share.

AT&T; reached its highest levels since late 1983, shortly after it began trading separately from the seven regional companies that were divested in the breakup of the Bell System.

Bank stocks were strong as Chemical New York and Bank of New York reported higher fourth-quarter profits. Chemical rose 1 1/8 to 35 1/8, Bank of New York 7/8 to 36 7/8, Citicorp 2 1/8 to 39 3/8, J. P. Morgan 1 5/8 to 80 and Chase Manhattan 1 1/2 to 48 1/2.

Humana gained 1 1/2 to 24. The company said it expects its revenue to increase at an 11% to 12% rate through the rest of the fiscal year that ends Aug. 31.

In the daily tally on the Big Board, advancing issues outnumbered declines by more than three to one. The exchange’s composite index jumped 1.69 to 97.13.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 147.29 million shares.

Standard & Poor’s index of 400 industrials rose 3.71 to 187.63, and S&P;’s 500-stock composite index was up 3.13 at 168.31.

The NASDAQ composite index for the over-the-counter market shot up 3.31 to 250.65.

At the American Stock Exchange, the market-value index closed at 205.08, up 2.09.

The Wilshire index of 5,000 equities closed at 1,716.243, up 29.198.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,704, compared to 2,114 on Wednesday.

In the credit markets, yields on 30-year Treasury bonds rose to 11.55% from 11.51% late Wednesday.

In the secondary market for Treasury bonds, prices of short-term and intermediate-maturity governments fell 1/8 point to point and long-term issues were off point to 3/8 point, according to the investment firm of Salomon Bros. Inc.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

In corporate trading, industrials and utilities fell 3/8 point.

Among tax-exempt municipal bonds, general obligations were unchanged and revenue bonds fell point.

Yields on three-month Treasury bills rose 6 basis points to 7.75%. Six-month bills rose 7 basis points to 7.95% and one-year bills were up 7 basis points at 8.36%. A basis point is one-hundredth of a percentage point.