Dow Surges 71 Points in Buying Free-for-All : Stocks: The big gains continued as more investors jumped into the market, apparently afraid to be left out of a big rally.

Stock prices soared Monday as investors apparently abandoned worries about inflation and corporate earnings and continued their stampede to Wall Street.

The Dow Jones industrial average rocketed 71.54 points, closing at 2,902.23--a gain of 2.5%--on heavy volume. That gain, and similar hikes in the broader market, translated to nearly $78 billion in paper profits for U.S. investors, according to Wilshire Associates, a Santa Monica-based firm that tracks the value of stocks traded on major American exchanges.

“We are having a feeding frenzy here,” said Jon Groveman, president of Ladenburg, Thalmann & Co. in New York. “Buyers are throwing caution to the wind. They want in.”

Small investors are now jumping into the market, industry experts say. But the large gains still seemed to be fueled by big institutions and short sellers, who sell borrowed stock hoping to repay with lower-priced shares. When prices rise, short sellers are forced to buy stock to cover their bets.

The rally, which has been building since mid-January, is the result of several factors acting in concert, stock experts said.

Inflation fears are abating because oil prices--a major component in the consumer price index--continue to slip. Interest rates are falling, which is expected to spur the faltering U.S. economy. And, perhaps most important, cash is being poured into the market as newly optimistic investors transfer funds out of money market accounts into corporate stocks and stock funds, industry experts said.

“People want to get in before it is too late” to capitalize on the rally, said Lynn Gomez, branch manager of Fidelity Investment’s Century City office.

“We are seeing considerable switching from cash to equity mutual funds,” added Patricia Harden, a Fidelity spokeswoman.

That burst of cash is fueling a rally of historic proportions.

Since war started less than a month ago, the Dow Jones industrial average has gained nearly 400 points, and the market value of U.S. securities has soared by $504 billion to nearly $3.48 trillion at the close of business Monday. That’s flirting with the market’s record value of $3.52 trillion, hit in October of 1989, said Robert J. Waid, senior associate at Wilshire.

“This has been a buying free-for-all,” said Alan R. Ackerman, executive vice president of Rich & Co. in New York. “It is a market driven by momentum with a mind of its own.”

Many market experts, frankly surprised by the sudden and sharp increases, are hesitant to predict what will happen next. However, some believe that stock prices will continue to march forward until the Dow Jones average hits a new high.

Indeed, the Standard & Poor’s index of 500 stocks shot up 9.22 on Monday, closing at 368.57--just shy of its all-time high of 368.93.

“There is no selling out there, there are just pauses in the rally,” said Ralph Bloch, institutional technical analyst at Raymond James & Associates. “This could easily push us to new highs.”

Monday’s rally was exceptionally broad-based, with no one group dominating.

Among the market highlights:

Oil stocks climbed precipitously, partly because of expectations that the Bush Administration would allow oil drilling in Alaska’s National Wildlife Refuge. Atlantic Richfield soared 5 1/8 to 133 5/8. Exxon climbed 1 3/8 to 54 1/2; and Chevron rose 87 1/2 cents to 74 7/8.

Transportation stocks also fared well. British Airways, which postponed a major aircraft replacement program, jumped 2 to 29 1/8. Alaska Air Group edged up 1/4 to 23 1/8. Meanwhile, UAL, the parent of United Airlines, rose 1 3/4 to 139 1/4.

Financial stocks also continued their climb. BankAmerica was up 1 3/4 to 33 5/8. Chase Manhattan rose 1 3/8 to 15 1/4. First Interstate rose 1 3/4 to 35 1/4. Great Western Financial was up 1/2, closing at 15 5/8, and Ahmanson, parent of Home Savings, gained 3/4 to 17 1/4.

IBM led the rally in industrial stocks, gaining 2 7/8 to 132 3/8. Deere was up 2 5/8 to 55 5/8 and Eastman Kodak climbed 1 3/8 to 47 1/8.

Entertainment concerns also fared well, with Disney up 2 3/8 to 118 and Time Warner up 4 to 102. Paramount Communications rose 3/8 to 45 1/2.

The New York Stock Exchange composite index gained 4.75 to 200.85. The American Stock Exchange index rose 4.22 to 341.10, and the NASDAQ over-the-counter index was up 7.30 to 444.10.

Trading was active, with 265.4 million shares changing hands on the New York Stock Exchange, compared to 187.84 million shares traded Friday. Gaining issues outpaced losers by a more than 4-1 margin.

Stock prices also climbed in major foreign markets.

London’s Financial Times-Stock Exchange index of 100 shares rose 33.8, or 1.5%, to 2,279.0. The DAX index of 30 stocks climbed 20.92 points in Frankfurt, closing at 1,488.74. And in Paris, the CAC index of 40 stocks rose 14.54 points to 1,637.29. The Tokyo stock market was closed Monday for a national holiday.

Credit

Bond prices were mixed in light trading as large investors sold bonds after last week’s rally.

The Treasury’s bellwether 30-year bond was down 1/16 point, or 63 cents per $1,000 in face amount. Its yield rose to 7.96% from 7.95% late Friday.

Bond analysts said institutional investors sent long bond prices slightly lower in a moderate selloff. Norah Hughes, first vice president of government securities for Swiss Bank, said some traders speculated that large investors were selling to jump into the stock market’s strong rally.

In recent months, reports of economic weakness have prompted the Federal Reserve Board to ease interest rates, which boosts the value of bonds already in the market.

The federal funds rate, the interest on overnight loans between banks, rose to 6.125% from 6% late Friday.

Currency

The dollar fell to a new postwar low against the German mark in domestic and European trading despite dollar buying by the central banks of a number of nations.

The dollar has fallen in recent days on speculation that the Federal Reserve will move to lower interest rates further to stimulate economic growth.

Declining U.S. interest rates make the dollar less appealing to foreign investors. In addition, the German central bank recently raised key lending rates to fight inflation, making the mark even more attractive.

Currency trading was light until an official of Germany’s central bank said that last week’s dollar buying by central banks was done to stabilize the dollar, not halt its slide.

The official also said the intervention had little effect, said Lorenzo Troni, vice president of foreign exchange at Paine Webber International Ltd.

“The market took that to believe the intervention (by Germany) will be sort of weak in the future,” Troni said. “The deutschemark immediately took off to new levels.”

The dollar finished at a new low of 1.4455 marks in Europe, down from 1.4575 marks late Friday and below the previous record closing low of 1.4490 marks Thursday.

In New York, the dollar sank to a record-low 1.4477 marks, compared to 1.4556 marks late Friday. The previous domestic closing low of 1.4483 marks was set Wednesday.

The markets were closed in Tokyo for National Foundation Day, a national holiday.

In London, the dollar was quoted at 127.65 Japanese yen, down from 128.20 yen late Friday in Tokyo. In New York, one dollar bought 127.73 yen, down from 127.78 yen late Friday.

In London, the British pound rose to $1.9980 from $1.9875 late Friday. In New York, one pound cost $1.9985, more expensive than $1.9885 late Friday.

Commodities

Corn market analysts predicted a drop in prices after the Agriculture Department projected a bigger increase in U.S. corn acreage than most observers expected.

Corn futures prices rose slightly ahead of the report while wheat and soybeans retreated.

On other commodity markets, silver futures hit a 17-year low, dragging other precious metals lower; energy futures surged, and livestock and meat were mixed.

Corn futures settled half a cent to 1 1/4 cents higher, with the contract for delivery in March at $2.41 1/4 a bushel; wheat was 1 1/4 to 3 cents lower, with the contract for delivery in March at $2.51 3/4 a bushel; oats were 1 cent to 1 1/4 cents lower, with March at $1.10 a bushel, and soybeans were 1 1/4 to 3 cents lower, with March at $5.66 3/4 a bushel.

After the close, the USDA said American farmers expect to boost corn acreage 4% this year to 77.5 million acres from 74.2 million acres last year. The number exceeded market expectations of about 76.1 million acres.

Farmers also expect to seed more soybeans: 58.5 million acres, compared to 57.8 million last year. But the projected 1% increase was smaller than that for corn and only slightly above the market’s expectation.

Joel Karlin, an analyst with Research Department Inc. in Chicago, said many farmers in the Mississippi Delta region may be inclined to grow cotton this year on land that they otherwise would have used for soybean production. Cotton prices have surged in the past six weeks due to shrinking stocks.

Silver plunged to its lowest level since January, 1974, on New York’s Commodity Exchange as a 70-point surge in the Dow Jones industrial average prompted investors to drop silver holdings, according to Bernard Savaiko, senior metals analyst with Paine Webber Inc. in New York.

Gold settled $3 to $3.30 lower, with February at $367.10 an ounce. Silver was 13 1/2 to 16 cents lower, with February at $3.685 an ounce.

Market Roundup, D10