STOCKS : Dow Rockets 42.33 as Interest Rates Drop

Stocks surged Wednesday as Wall Street heartily endorsed interest rate cuts by the nation’s banks. Recent fears of a long recession seemed to disappear.

The Dow Jones industrial average soared 42.33 points to 2,930.20, a 1.5% gain and the biggest in nearly two weeks.

In the broader market, advancing issues swamped losers 1,155 to 486 on the New York Stock Exchange. Big Board volume slipped, however, to 181.90 million shares from 204.93 million on Tuesday.

Stocks got a quick shot in the arm after the opening, when big banks began cutting the prime lending rate to 8.5% from 9%.

The move came a day after the Federal Reserve lowered two benchmark short-term interest rates in an effort to breathe new life into the ailing economy.

“It’s very encouraging banks followed through,” said David Bostian, economist at Jesup Josephthal. “That’s very important for consumer psychology.”

Separately, the Commerce Department reported that the index of leading economic indicators rose 0.5% in March, on top of a 1.2% increase the month before.

And in its latest survey of economic conditions, the Fed said there are signs that the recession may be bottoming.

The combination of better news on the economy with falling interest rates revived many investors’ expectations of a quick recovery in corporate profits. With the Dow off 4% by Tuesday from its mid-April peak, many investors saw bargains in the market, traders said.

However, analysts noted that smaller stocks continued to be weak. The NASDAQ composite index gained just 0.7%, rising 3.13 points to 487.85. The index was hurt by another broad decline in technology stocks, after Apple Computer said current-quarter earnings may fall below year-ago levels. Apple plunged 7 3/4 to 47 1/4.

Some analysts warned that the latest economic reports shouldn’t be taken as gospel. “Most of us agree that the recovery is not going to be as quick as we thought,” said Alice Sadlo, analyst at McDonald & Co. “The question is whether this (rate cut) was enough to get things going.”

Among the market highlights:

* Many industrial stocks gained on hopes for recession’s end. Boise Cascade rose 1 to 25 7/8, GE added 1 3/4 to 72 1/2, GM gained 1 7/8 to 37 5/8 and Alcoa was up 2 1/2 to 70.

* Key tech stocks continued to sink as Apple’s bomb lowered hopes for the industry. Hewlett-Packard lost 1 3/4 to 49 3/8, Sun Microsystems fell 1 1/8 to 35 5/8, AST Research dropped 2 to 20 1/2 and Dell Computer lost 2 1/4 to 21 1/8.

But many other tech issues gained. International Rectifier jumped 1 5/8 to 22, Microsemi added 1/4 to 2 5/8, Computer Sciences rose 3/4 to 66 and MacNeal Schwendler added 3/4 to 15 5/8.

* Many financial stocks rose as interest rates fell. Great Western Financial rose 1 to 17 1/2, Wells Fargo added 1 7/8 to 85 3/8 and Travelers jumped 1 3/4 to 24 1/4. Pasadena-based Countrywide Funding rose 1 5/8 to 18 3/8 after saying it originated $575 million in mortgages in April, a company record.

* Investors flocked back to drug stocks, which have been beaten down lately. Bristol Myers jumped 3 to 78 1/4, Warner-Lambert gained 2 7/8 to 75, Merck soared 3 3/4 to 111 1/2 and Pfizer rose 2 3/8 to 56 7/8.

Also in health-care, Irvine-based Trimedyne jumped 11/16 to 4 11/16. The firm’s new fiber-optic “cold” laser catheter was federally approved for clinical trials to remove coronary artery clots.

* Circus Circus rose 4 3/4 to 65 1/2 after Oppenheimer & Co. said the casino firm was likely to beat earnings expectations over the next six months. Paramount jumped 1 3/4 to 38 5/8 after Brandon Tartikoff was named its studio chief.

* Among stocks reacting to new offerings, computer disk-drive maker Micropolis fell 1/4 to 13 5/8. It sold 2 million shares at $13.50 each. Vons fell 1 1/8 to 28 7/8 after the supermarket chain set plans to offer 11 million shares. Also, retailer Filene’s Basement went public at 14 1/2 and closed at 16 1/4.

Overseas, Tokyo stocks ended higher across the board as speculation mounted that a Japanese rate cut would follow. The Nikkei average rose 377.75 to 26,489.00.

In London, the Financial Times 100-share average finished at 2,508.4, up 22.2. The German market was closed for May Day.

Credit

Bond prices were mixed in the wake of market interest rate cuts.

The Treasury’s 30-year bond rose 3/16 point, or $1.56 per $1,000 face amount. Its yield eased to 8.17% from 8.18% on Tuesday.

But shorter-term interest rates edged higher after declining sharply on Tuesday, when the Fed cut its key discount rate.

The federal funds rate, the interest on overnight loans between banks, was quoted at 5.75%, down from 5.94% on Tuesday.

Currency

The dollar rebounded after Tuesday’s big setback, gaining on speculation that Japan will cut its interest rates next week.

After plunging from 1.780 German marks on Monday to 1.707 on Tuesday as the Fed cut interest rates, the dollar recovered to 1.710 marks in New York.

It also surged to 138.15 Japanese yen from 136.15 on Tuesday.

Other late dollar rates in New York, compared to Tuesday’s late quotes, included: 1.4480 Swiss francs, up from 1.4410; 5.7885 French francs, up from 5.7760; 1,266.00 Italian lire, up from 1,263.00, and 1.15175 Canadian dollars, down from 1.15285.

Commodities

Gasoline futures shot higher on the New York Mercantile Exchange on news that U.S. gasoline inventories fell last week.

Unleaded gasoline futures settled 0.80 to 2.22 cents higher, with the contract for delivery in June at 70.83 cents a gallon. Meanwhile, light, sweet crude oil futures settled 22 to 29 cents higher, with June at $21.25 a barrel.

The American Petroleum Institute said U.S. gasoline inventories fell 666,000 barrels to 204.2 million during the week ended Friday, a surprising drop.

Stocks remained slightly below the 205-million-barrel level established by the Energy Department as the minimum operating level before shortages could develop.

Gold settled up 0.10 cent on New York’s Comex, with May at $356 an ounce; silver was 1.9 to 2.4 cents lower, with May at $3.95.

Market Roundup, D6