STOCKS : Inflation Data Triggers Rally; Dow Rises 21.02

Better-than-expected news about inflation spurred stocks to a broad gain Friday.

The Dow Jones industrial average climbed 21.02 to 2,980.77, extending its rise for the week to 48.30 points.

Advancing issues outnumbered losers by more than two to one on the New York Stock Exchange, where volume totaled 173.10 million shares as of 4 p.m. EDT.

The Labor Department reported that the producer price index of finished goods dropped 0.3% in June. The figure was warmly received in the bond market, driving interest rates down.

The government also reported a 0.2% decline in retail sales last month--an indication that consumers are unenthusiastic about an improving economic outlook.

Though the stock market responded well to lower interest rates, traders also were confronted with more disappointing corporate earnings--a reminder that if the economy slows further, stocks’ rally could quickly run out of steam.

Among the market highlights:

* Bad earnings hurt Westinghouse, which fell 1 to 25 3/8. The company said “expectations of an early and strong economic recovery have not materialized.”

Meanwhile, medical firm Becton Dickinson, which warned that its third-quarter profit would be well below what analysts have projected, plummeted 8 to 66 3/4.

Computer disk-drive maker Seagate lost 1/4 to 8 1/4 after announcing layoffs of 1,200 workers, a sign of continuing troubles in the high-tech area. Tech stocks in general were flat to lower.

* Chemical Waste Management fell 2 3/4 to 18 1/4, and parent Waste Management lost 2 to 35 1/2, after the Alabama Supreme Court ruled in favor of special tax laws and a cap on hazardous-waste importation in the state, where Chemical Waste has a large facility.

* On the plus side, Green Tree Acceptance jumped 2 7/8 to 34 1/8 after the financing firm’s report Thursday that second-quarter earnings rose 53%. Many other financial and bank stocks also gained Friday.

* Among Southland firms, IHOP (parent of International House of Pancakes) made its initial public stock offering, selling 6.2 million shares at $10 each. IHOP also closed at 10 on the NASDAQ market.

Beverly Hills-based International Cablecasting jumped 7/16 to 4 10/16. The firm said Scientific Atlanta and KBL Services will make a $12.5-million equity investment in the company at $3.56 a share. The firm provides specialized audio services for residential cable TV.

Overseas, prices rebounded in Tokyo on what traders described as a partial recovery from sharp declines caused by the scandal rocking Japan’s securities industry. The 225-stock Nikkei index rose 199.86 points to 23,137.78.

In London, the 100-stock Financial Times index fell 13.1 points to 2,497.4. In Frankfurt, Germany, the DAX index added 6.91 points to 1,644.76.

In Mexico City, the Bolsa index rocketed 20.19 points to 1,174.90, yet another record.

Credit

Bond prices rose, boosted by government reports indicating that inflation was waning and that the economy remained sluggish.

The Treasury’s 30-year bond rose 9/32 point, or $2.81 per $1,000. Its yield sank to 8.43% from 8.46% on Thursday.

The federal funds rate, the interest on overnight loans between banks, fell to 5.75% from 5.875% on Thursday.

Currency

The dollar tumbled when seven central banks, including the Federal Reserve, swooped into the foreign exchange market and aggressively sold the currency.

Money traders said the U.S., British, Belgian, French, Italian, Norwegian and Danish central banks dumped dollars together.

Kevin Lawrie, vice president of Bank of Boston in New York, said many traders believe that the intervention was triggered by the German Bundesbank’s decision Thursday not to raise interest rates. That decision led to a jump in the dollar Thursday.

The dollar plummeted to 1.788 German marks in New York from 1.834 on Thursday. It also fell 2.29 Japanese yen to close at 136.35.

Commodities

Tension between the United States and Iraq, along with shutdowns of key oil production and refinery facilities elsewhere in the world, drove oil prices to their highest levels in 9 1/2 weeks.

On the New York Mercantile Exchange, crude oil for August delivery closed 43 cents higher at $21.72 a barrel.

Gold for near-term delivery closed up 80 cents at $368.60 per ounce on the New York Comex. Silver was at $4.37, up 3 cents.