Financial Markets : Rally Carries Stocks to New Post-Crash High : Dow Up 7 as Fears About Rates and Inflation Ease

Stock prices kept climbing Wednesday, getting a little more mileage out of the rally that has carried the market to its highest levels since the crash of 1987.

The Dow Jones index of 30 industrials rose 7.51 to 2,386.91, bringing its gain over the past four sessions to 90.91 points.

Advancing issues outnumbered declines by about 4 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 827 up, 634 down and 524 unchanged.

Volume on the floor of the Big Board came to 191.51 million shares, down from 208.65 million in the previous session.

Analysts said stocks have drawn support in recent days from spreading hopes that inflationary pressures might be easing and interest rates were turning downward.

Inflation figures for March, unlike those for the two previous months, contained no unpleasant surprises that seemed likely to prompt the Federal Reserve to tighten credit further.

Brokers said inflation fears were countered Wednesday by strong earnings reports from several prominent companies.

American Telephone & Telegraph rose 3/8 to 33 1/2. The company reported a 20.6% increase in its first-quarter earnings.

Philip Morris, which also posted a strong first-quarter earnings gain, climbed 2 3/4 to 125 1/8.

Other gainers among the blue chips included DuPont, up 7/8 at 109 3/8; Minnesota Mining & Manufacturing, up 3/4 at 70 3/4; Johnson & Johnson, up 3/4 at 95 5/8, and Sears, Roebuck, up 1/4 at 45 7/8.

Phelps Dodge picked up 1 1/2 to 60 on a strong quarterly earnings report.

In Tokyo aggressive buying by individuals boosted share prices to a record close, but institutions held back on worries about possible rises in local interest rates and fallout from a major domestic political scandal, brokers said. The Nikkei 225-share index ended the day up 42.17 points, or 0.13%, at 33,363.83.

In London share prices finished higher in moderate trading. At the close, the Financial Times 100-share index was up 12.6 points at 2,087.

Credit

Bond prices dipped slightly in quiet trading as the market failed to follow up a strong rally generated by signs that the nation’s economy is slowing.

The Treasury Department’s benchmark 30-year issue fell about 1/32 point, or 30 cents for every $1,000 in face amount. Its yield, which moves in the opposite direction from price, rose to 8.94% from 8.93% late Tuesday.

Analysts said the market pulled back slightly after the opening Wednesday, partly on profit taking and amid surging crude oil prices stemming from an oil and gas explosion in the North Sea.

“Higher oil prices means higher inflation,” said Peter Greenbaum, energy analyst with Smith Barney, Harris Upham & Co.

Inflation erodes the value of fixed-income securities.

But the retreat didn’t last and the market tended to ignore the oil price rise, said William V. Sullivan, director of money market research for Dean Witter Reynolds Inc.

A higher dollar, which historically boosts bond prices, also had little effect, Sullivan said.

The market’s mild performance contrasted with a surge in bond prices Tuesday following two economic reports that provided further evidence that the economy is slowing. The reports on consumer prices and housing starts suggested that the Federal Reserve’s policy of pushing interest rates higher has moderated economic growth and helped ease inflationary pressures.

“The market recaptured most of the lost ground,” Sullivan said. “So far, although there is support for the rally, it seems to be tepid support.”

In the secondary market for Treasury securities, prices of short-term government issues were down 1/32 point to 1/8 point, intermediate maturities fell between 1/16 point and 3/16 point and long-term issues were down as much as 3/16 point, according to Telerate Inc., a financial information service.

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

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, was down 1.02 to 1,131.81.

In corporate trading, industrials edged up. Moody’s investment grade corporate bond index, which measures the total return on 80 corporate bonds with maturities of five years or longer, was up 0.32 to 302.92.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds held steady at 91 21/32. The average yield to maturity also was unchanged from late Tuesday at 7.64%.

Yields on three-month Treasury bills were down to 8.69% as the discount fell 7 basis points to 8.4%. Yields on six-month bills fell to 8.85% as the discount lost 6 basis points to 8.37%. Yields on one-year bills, meanwhile, rose to 9.14% as the discount rose 1 basis point to 8.45%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.

The federal funds rate, the interest on overnight loans between banks, was quoted at 11%, up from 9.5% late Tuesday. The rise was considered technical in nature and did not signal any broader policy change by the Fed.

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