Economic News Boosts Stocks; Dow Leaps 32.87 to Record High

Stocks rose to record highs while bonds slumped Friday after the Commerce Department reported evidence of a stronger-than-expected economic recovery.

The Dow Jones industrial average spent most of the day in record territory before finishing up 32.87 points at 3,040.25, surpassing the old record of 3,035.33 on June 3.

The Dow’s new high followed records set by the broader New York Stock Exchange composite index and the NASDAQ composite index of smaller stocks. They also closed at records Wednesday and Thursday.

Analysts said the stock market’s fourth advance in a row was triggered by the government’s report that durable goods orders to U.S. factories surged 10.7% in July--the biggest monthly gain in 21 years. Most economists had predicted a rise of no more than 2%.

In addition, traders said, stocks benefited from continuing euphoria over the collapse of the coup in the Soviet Union.

“The durable goods number caught a lot of people by surprise,” said John Burnett, senior vice president of trading at Donaldson, Lufkin & Jenrette Securities in New York. “It shows that the economy is not double-dipping,” or falling back into a second recession after a brief recovery.

As a result, stocks of basic industrial goods companies that perform well during recoveries were particularly strong.

Indeed, the Dow index was powered by such names as Alcoa, up 3 1/8 to 69 1/2; General Electric, up 1 3/4 to 74 3/4, and International Paper, up 2 to 70 3/8.

Yet many market analysts were cautious about Friday’s records. “The market is a bit ahead of itself and needs to consolidate” its gains, said Eugene Peroni, director of technical analysis at Janney Montgomery Scott Inc. in Philadelphia.

Some experts expressed concern that the Dow record came in moderate trading. Volume on the NYSE was 189 million shares, down from the week’s peak volume of 233 million shares Wednesday.

Also, gaining stocks outnumbered losers 961 to 612 on the NYSE, nowhere near as strong as Wednesday, when winners beat losers 1,472 to 255.

“We’re still fairly negative on the market,” added Bob Moseson, president of Performance Analytics Inc., a Chicago pension consulting firm. “Speculative sentiment is still very high . . . The market seems very vulnerable.”

But Jack Solomon, technical analyst at Bear, Stearns & Co., predicted that by the end of next week investors will be focusing on whether the Dow will break 3,100 rather than whether it will hold above 3,000.

The stock market’s gains came despite a rise in interest rates as a result of the unexpectedly sharp gain in durable goods orders.

But analysts note that it isn’t uncommon at the start of economic recoveries for stocks to rise even in the face of higher interest rates .

Among Friday’s highlights:

* Rail and airline stocks helped lead the rally. Investors expect shipping and business travel to rise as the recovery picks up steam. Burlington Northern rose 1 1/4 to 33 3/8, Delta 2 5/8 to 68 3/8 and Southwest Airlines 1/2 to 24 3/4.

* Many classic consumer-growth stocks took a back seat as investor interest shifted to industrials. Wal-Mart was flat at 49 1/4, Home Depot lost 3/8 to 52 1/8 and Coca-Cola inched up just 1/8 to 65.

* Among Southland issues, Santa Monica-based Vidmark, a home video distributor, jumped 3/4 to 5 1/4 after reporting that quarterly earnings doubled.

Also, casual-shoe company Vans Inc., based in Orange, went public. It sold 4.1 million shares at 14 each, and the stock closed at 15 on the NASDAQ market.

Overseas, London stocks jumped to their second consecutive record as the Financial Times 100 index rose 17.7 points to 2,640.7.

In Frankfurt, the DAX index slipped 3.59 points to 1,627.24 as euphoria over events in the Soviet Union cooled. In Tokyo the Nikkei index dropped 450.43 points to 22,065.34 on new concerns about Japanese economic problems.

In Buenos Aires, Argentine stocks tumbled 4.5% in a wave of profit taking on record volume. But in Mexico City, the Bolsa index gained 12.9 points to 1,206.59, just short of its record.

Credit

Treasury bond yields jumped as prices sank following the surprisingly buoyant durable goods report. The news seemed to dim hopes that the Federal Reserve would move to ease interest rates further.

The Treasury’s 30-year bond dropped 7/8 point, or $8.75 per $1,000. Its yield, which rises when prices fall, jumped to 8.13% from 8.05% Thursday.

Yields on shorter-term bonds also soared. The yield on three-year T-notes shot up to 6.78% from 6.64% Thursday as investors sold the securities.

Before the durable goods report, the Fed was widely expected to ease interest rates by the time August unemployment statistics are released Sept. 6. Analysts believed that the economy was weak enough to justify lower rates.

The surge in durable goods orders suggests that the Fed will decide that the recovery is on track and that lower rates aren’t needed.

The federal funds rate, the interest on overnight loans between banks, was 5.438%, down from Thursday’s 5.563%.

Currency

The dollar moved sharply higher on the durable goods report.

With expectations of a stronger economy and less likelihood of lower interest rates, traders jumped back into the greenback, figuring that returns on dollar-based securities should improve.

The dollar ended at 1.748 German marks, up from 1.730 Thursday. It rose to 136.90 Japanese yen from 136.60.

Commodities

Coffee futures jumped amid rumors of a halt in Brazilian exports and perceptions that Latin American producers are close to implementing a plan to withhold some of their crop from market.

Coffee for delivery in September rose 3.6 cents to 82.90 cents a pound on New York’s Coffee, Sugar & Cocoa Exchange.

Elsewhere, light sweet crude oil for October settled at $21.81 a barrel, up 9 cents for the day and 51 cents for the week on the New York Merc.

On New York’s Comex, August gold fell 90 cents to $353.40 an ounce; September silver rose 3.1 cents to $3.94.

The ‘Russia Rally’: Wild Week for Stocks Optimism about the world economy sent the Dow Jones industrial average up 32.87 points Friday to a record 3,040.25, finally topping its old high of 3,035.33 set on June 3. Aug. 19: 2,898.03 Aug. 20: 2,913.69 Aug. 21: 3,001.79 Aug. 22: 3,007.38 Aug. 23: 3,040.25, up 32.87 Stock Records Set Across the Board . . . Key indexes joining the Dow at new all-time highs on Friday, and their gains for the day, week and year to date:

Fri. Percentage change: Index close Fri. Week ’91 Dow industrials 3,040.25 +1.1% +2.4% +15.4% S&P; industrials 468.89 +0.8% +2.4% +21.0% S&P; 500 394.17 +0.7% +2.2% +19.4% NYSE composite 215.75 +0.7% +2.0% +19.5% NASDAQ composite 521.06 +0.5% +1.7% +39.4% FTSE-100 (London) 2,640.70 +0.7% +0.8% +23.2%

. . . As Heavy-Industry Stocks Lead the Way

Fri. close Pct. 52 week Stock and change change high/low Ford 32, +1 7/8 +6.2% 43-25 Clark Equipment 24 1/2, +1 3/8 +6.0% 32 7/8-21 1/4 Reynolds Metals 61 1/2, +3 3/8 +5.8% 70-48 3/4 Phelps Dodge 69 1/4, +3 3/4 +5.7% 72 3/8-46 1/8 Alcoa 69 1/2, +3 1/8 +4.7% 73 1/8-49 5/8 Georgia-Pacific 58 1/8, +2 5/8 +4.7% 58 1/4-25 3/8 Illinois Tool 63, +2 1/4 +3.7% 67-39 1/4 Deere 52 5/8, +1 7/8 +3.7% 57 7/8-37 5/8