The importance of the stock market's record-breaking performance last week was its predictability. According to market analysts, investors have been reacting favorably to good news - even though that news had been fully expected.
Take the Aluminum Company of America. Most specialists who track the aluminum industry have known for some months that this sector of the economy was experiencing strong recovery and growth. Even so, when third-quarter estimates late last week showed Alcoa doing well, its stock price surged ahead.
Similarly, for months scarcely an investor around had had a bad word to say about IBM. It is one of the Most widely owned stocks in the country. The discipline and acumen of ''Big Blue,'' especially in the computer industry, is a part of corporate folklore. IBM stock has been strong and expensive.
Yet last week, IBM moved ahead once again, up 1 1/4 Wednesday and another full point Thursday. This stock is credited with carrying much of the Dow Jones industrial average up with it. The Dow closed the week at a record 1,272.15, up 39.02 points. Volume surged from the 77 million share range to the 100 million-plus, showing broad investor activity.
''What we're seeing is a big institutional bull market,'' says Robert H. Stovall, director of investment policy at Dean Witter Reynolds. ''The recommended stocks are doing very well. There is a positive response to predictable news.''
Mr. Stovall notes that ''contrarian'' thinking (i.e., if the majority expects the market to go up, then sell because stocks will be valued at their highest) has taken a beating. The market, he says, ''is marching right along, and the contrarians are in full retreat.''
Measured by Dow Jones' 30 stocks or by Standard & Poor's 500, however, the stock-market surge has been riding mostly on the nation's highest-quality companies. The broader-based Value Line index of 1,500 stocks with smaller capitalization has been lagging for three months.
As the third quarter ended, institutional investors generally filled their portfolios with high-quality stocks. The most popular were IBM, Chrysler, Ford, General Motors, 3M, Westinghouse, utilities, and major retail chains such as Federated Department Stores, J.C. Penney, and Sears, Roebuck. Indicating confidence in an continued bull market trend, brokerage stocks (Merrill Lynch, Sears [Dean Witter's parent], and American Express) also did well.
The biggest reason for the record performance has been good news and expectation of better news:
* Treasury Secretary Donald Regan's forecast that the federal deficit could shrink to $100 billion by fiscal 1985.
* The Federal Reserve's apparent ability to keep the money supply within a targeted, moderate-growth range.
* Less concern over renewed inflation. This is credited with causing the drop in precious metals last week.
* Optimism over interest rates.
The predominant concern of institutional investors the past three months had been interest rates. After hitting a record high of 1,248.30 in June, the Dow began to retreat, dropping to a near-term low of 1,163.06 in July, the day most lenders upped their prime rates. That, however, turned out to be the only hike of the prime in the past three months. Now there seems a consensus that rates are not going to rise dramatically.
''We're getting more and more converts to that,'' says William M. LeFevre, editor of Purcell, Graham & Co.'s market performance letter. Both LeFevre and Stovall point out that the Dow Jones utility index recently reached the highest point it has been since November 1968. This, they say, indicates interest rates will moderate and underscores the strength of the market.
Although he calls last week's rally impressive, Merrill Lynch vice-president Hans Schueren is concerned. He says the Dow and S&P mask the fact that secondary stocks are not performing as well. When divergence between these indexes and the broader market occurs, he says, the broader usually drags down the majors.
LeFevre takes the opposite view. He contends the broader market is about to make new highs also. He expects third-quarter earnings to be ''better than even the most optimistic estimates - they ought to be a wow.'' By the year's end, the Dow should be near 1,350, LeFevre says, and unless President Reagan chooses not to run for reelection, it should reach 1,450-1,500 next year.