STOCKS : Dow Jumps 15 on Hopes Fed Will Cut Rates

Wall Street ended the week as it began, with prices rising Friday on investors’ hopes of a cut in interest rates.

The Dow Jones industrial average rose 15.34 points to 2,920.79. Advances led declines 933 to 612 on New York Stock Exchange volume of 198.6 million shares.

Blue chips notched their moderate gain as investors clung to the view that lower interest rates were close at hand.

Boosting that optimism was a 0.1% decline in March consumer prices, the first monthly loss since April, 1986.

The figure was in line with a report Thursday that showed wholesale prices also fell last month. The two reports, with their clear indication of easing inflation, could provide room for the Federal Reserve to lower interest rates and stimulate the economy.

“Those numbers are convincing people that even if we didn’t get an ease today, it’s coming soon,” said Ed Laux of Kidder Peabody.

Stocks began their run after the consumer price news from the Labor Department, which reported that retail prices rose at a 2.4% annual rate in the first three months of this year, compared to last year’s inflation rate of 6.1%.

“Plainly, the economy is weaker than optimists thought,” said Stephen Saker, a director of Global Advisors Inc. “We’re optimistic in the long haul, but I don’t think 1991 will go down as the rosiest year.”

But the lack of any clear sign from the Fed and worries about a downturn in earnings at International Business Machines Corp. sapped the market’s early rally.

The world’s No. 1 computer company said first-quarter earnings tumbled 49%, even before a $2.26-billion charge. IBM closed down $2.125 to $108.50.

Analysts cut their 1991 estimates for IBM on expectations that profits will be hampered by the weak economy.

The NASDAQ composite index rose 2.31 points to end at 501.62, breaking the closing high it set Thursday.

Interest in the broader market also swept the Standard & Poor’s 500 index to a new closing high of 380.40, up 2.77, and the NYSE composite index of all listed common stocks rose 1.44 points to a record of 208.08.

Among the highlights:

* Microsoft lost 3 3/4 to 107 1/4 on fears of a widening federal antitrust probe.

But many tech stocks continued to show resilience. Chatsworth-based disk drive maker Micropolis rocketed 3 1/2 to 17 3/4 after reporting first-quarter earnings of 50 cents a share, versus a loss of 9 cents a share a year ago. The report clearly took investors by surprise.

* Other tech gainers included Intel, up 2 1/4 to 54 1/4; Ashton-Tate, up 7/8 to 10, and Advanced Logic, up 1 3/4 to 20 1/2.

* Retailers as a group were strong, even though March sales were generally sluggish. Winners included Gap, up 3 3/8 to 60 7/8; Toys R Us, up 2 to 28 7/8, and Home Depot, up 2 to 58 1/8.

* Despite the market’s general nervous tone, investors continued to find stocks to like. Recreational vehicle maker Fleetwood Enterprises jumped 2 to 32 3/4, insurer Twentieth Century Industries rose 1 3/4 to 42 1/8 and Hilton gained 2 1/2 to 43 1/4.

In London, the Financial Times-Stock Exchange 100-share index closed down 5.5 points at 2,526.1, a loss of more than 19 points from the record high it reached last Friday.

In Frankfurt, Germany, the 30-share DAX index rose 17.77 points to 1,583.14, its highest close of the week. It was still down about 4 points from where it ended last Friday.

In Tokyo, the 225-share Nikkei average closed 157.31 points higher at 26,582.50. That made for a weekly loss of more than 184 points.

Credit

Bonds rose sharply following a report showing inflation declined last month, raising expectations by bond analysts that interest rates will drop soon.

The Treasury’s bellwether 30-year bond shot up 1 5/32 point, or $11.56 per $1,000 in face amount, at closing. Its yield, which moves in the opposite direction from price, dropped to 8.15% from 8.25% late Thursday.

The Labor Department said its consumer price index fell 0.1% in March, the first decline in five years.

All week, bond strategists predicted that the Federal Reserve would cut interest rates if the consumer price index showed moderate inflation. The bond market began to rally after release of the inflation report.

The federal funds rate, a key indicator of interest rates, was quoted at 5.0% at closing, down from 5.625% Thursday. Raymond Dalio, president of the Connecticut-based Bridgewater Associates Inc., said the relatively low federal funds rate was not a result of any explicit Fed policy shift.

Currency

The dollar advanced worldwide in erratic trading despite further economic data that many believe support lower interest rates.

Favorable news on inflation, coupled with signs that the recession is holding on, triggered much speculation that the Federal Reserve would move to cut interest rates.

Lower interest rates make dollar-denominated securities less valuable for investors.

The dollar initially fell on the report, but within minutes the currency was in demand, said David Ogg, a vice president at Credit Suisse.

In Tokyo, the dollar fell to a closing 135.85 Japanese yen from 136.65 yen at Thursday’s close. Later in London, it rose to 136.30 yen. In New York, the dollar settled at 136.40 yen, up from 136.20 yen on Thursday.

In London, the British pound fell to $1.7775 from $1.7905 late Thursday. In New York. it cost $1.7725 to buy one pound, less expensive than Thursday’s $1.7904.

Other late dollar rates in New York, compared to late Thursday’s rates, included 1.6880 German marks, up from 1.6705; 1.4320 Swiss francs, up from 1.4118; 5.7020 French francs, up from 5.6485; 1,252.25 Italian lire, up from 1,239.75, and 1.1509 Canadian dollars, up from 1.1506.

Commodities

Cotton futures rallied strongly as a storm of buying erased the previous day’s losses, supporting ideas that near-term deliveries will reach 90 cents a pound.

On other commodity markets, oil prices rose; precious metals were mixed; grains and soybeans were mixed, and livestock and meat futures were mixed.

Cotton futures settled 60 cents to 1.86 cents higher on the New York Cotton Exchange, with the contract for delivery in May up 1.86 cents at 88.49 cents a pound.

Light sweet crude oil settled 20 to 59 cents higher, with May at $21.48 a barrel; heating oil was 0.76 to 0.94 cent higher, with May at 56.05 cents a gallon; unleaded gasoline was 0.75 cent to 1.29 cents higher, with May at 71.01 cents a gallon; natural gas was 0.5 cent lower to 1 cent higher, with May at $1.376 per 1,000 cubic feet.

Gold futures fell moderately on New York’s Commodity Exchange after the government reported the first monthly drop in consumer prices in five years. Gold often is perceived as an investment hedge against inflation.

Gold settled $1.60 to $2.20 lower, with April at $361.30 an ounce; silver was 0.9 cent to 1.2 cents higher, with May at $3.988 an ounce.

Market roundup, D6