FINANCIAL MARKETS : Rally Boosts Dow to Fourth Record in Row

Wall Street rallied to a fourth consecutive record close Friday, supported by a strong bond market and speculation that the Federal Reserve may ease credit after the government reported surprisingly weak September employment.

The Dow Jones industrial index rose 11.96 points to close at 2,785.52, a new closing high that put the Dow within striking distance of 2,800.

For the week, the 30-share Dow gained 92.70 points, the largest weekly gain since June 3, 1988.

Advancing issues outnumbered declines with 780 up, 667 down and 520 unchanged.

“Most of the action at the opening was a response to the employment, which was favorable for the bond market and to interest rates in general. Stocks firmed on that,” said Lewis Smith, a technical analyst at Bear, Stearns & Co.

Volume on the floor of the Big Board came to 172.52 million shares, against 177.89 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 209 million shares.

Before the opening, the Labor Department reported that the unemployment rate rose one-tenth of a percentage point in September to 5.2%.

Analysts said traders interpreted the report as a fresh signal that the economy was making only sluggish progress. The inference from that, brokers said, was that chances were improving for a further easing of the Federal Reserve’s credit policy sooner or later.

The report sent interest rates lower in the credit markets. Rates on short-term Treasury bills fell about 20 basis points, or hundredths of a percentage point.

USX led the active list, up 1/8 at 38 1/2. Late Thursday, Carl C. Icahn disclosed that he had raised his stake in USX, confirming recent rumors that he was intensifying pressure on the company.

In Tokyo, index-linked trust funds and other investors caught interest-rate jitters after European interest rate rises on Thursday failed to beat the dollar down. In the face of heavy selling, prices slumped in moderate trading. The Nikkei 225-share average sank 313.64 points to close at 35,209.35.

Shares ended slightly lower on London’s Stock Exchange, but well above their session lows. The Financial Times 100-share index ended 4.1 points lower at 2,277.5.

Credit

Bond prices soared on expectations that the Federal Reserve might soon lower interest rates following the release of the unemployment report for September.

The Treasury’s benchmark 30-year bond was up 21/32 point, or about $6.56 for every $1,000 in face value. Its yield, which falls when prices rise, dropped to 8.01% from 8.07% late Thursday.

The jobs report could encourage the Federal Reserve to ease interests rates in the near term to reinvigorate the economy. But on Friday the central bank’s action in draining some bank reserves was perceived as a signal that Fed policy had not changed.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.813%, down from 9% late Thursday.

Currency

The dollar finished mixed in U.S. trading after marching higher overseas as investors remained bullish about the U.S. currency despite ongoing efforts by central banks to squelch demand.

Gold finished higher in New York after falling in Europe and Asia. Republic National Bank of New York said gold was bid late in the day at $363.25 an ounce, up from $363.10 late Thursday.

Dollar traders mostly ignored efforts by central banks from the United States, West Germany and Japan to push the currency lower, raising more questions about the Group of Seven industrial nations’ attempts to stabilize world currency markets.

“Central banks don’t seem to know what they want,” said Lawrence A. Veit, international economist with Brown Bros., Harriman & Co. “Unless the central banks show a sign of getting their act together we will see a stronger dollar.”

In Europe, the dollar was quoted at 1.8880 West German marks, up from 1.8845 marks Thursday. In late New York trading, the dollar climbed to 1.8885 marks, from 1.8848 on Thursday.

The dollar rose 1.40 yen to 142.45 yen in Tokyo and changed hands at 142.50 yen in London, up from 142.30. In New York, meanwhile, the U.S. currency dipped to 142.35 yen from 142.55 yen a day earlier.

In London trading, the British pound rose to $1.6030, from $1.6100 late Thursday. But in New York, the pound fell to $1.6055 from $1.6115 on Thursday.

Commodities

Coffee futures prices sank for a fourth straight day, hitting 14-year lows after a meeting of the world’s biggest coffee producers and consumers ended with no price-support agreement.

“They’re going to keep the door open for negotiations and that’s it,” said Kim Badenhop, a market analyst with Merrill Lynch Capital Markets Inc.

On other commodity markets, corn and soybeans slumped while livestock, precious metals and energy futures were mixed.

Coffee futures finished 2.5 to 2.79 cents lower, with December at 70.39 cents a pound, the market’s lowest settlement since the summer of 1975.

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