Bush Speech Helps Push Dow Up 33.77 : Market Overview

* Stocks ran up their sharpest gain in more than six weeks, extending Wednesday’s mild rally as investors reacted favorably to President Bush’s economic speech. The Dow Jones average climbed 33.77 points to 3,305.16, marking the best single-day showing for the average since it jumped 45.12 points on July 29.

* Treasury bond prices ended mixed after traders determined that the President’s speech, which had been billed as a major economic address, contained few new policies.

* The dollar rose against most major currencies as traders followed events in Iraq, and Britain’s prime minister said he would not devalue the pound.

Stocks

The market advanced gradually all day, picking up some momentum as Bush, speaking before the Detroit Economic Club, laid out a repackaged economic manifesto in which, among other proposals, he suggested that a 1% across-the-board tax cut would be possible if Congress followed his spending recommendations.

Investors drew comfort from Bush’s economic speech, in which he affirmed a commitment to lower taxes and impose limits on government spending, analysts said.

The higher dollar also provided further support for the stock market.

In the broader market, advancing issues outnumbered declines by more than 9 to 5 in the daily tally on the New York Stock Exchange. Big Board volume surged to 221.99 million shares, up from 178.80 million Wednesday.

Transportation stocks continued to gain, with the Dow transportation average up 23.95 points to 1,280.08.

At the same time, analysts said stocks drew some support from expectations of favorable inflation news. The Labor Department reports today on the producer price index of finished goods, and next week on the consumer price index, for August.

In Thursday’s economic news, initial claims for state unemployment insurance rose 8,000, or a little less than expected, in the week ended Aug. 29.

Among the market highlights:

* National Semiconductor rose 7/8 to 12 in active trading. The company reported earnings for the fiscal first quarter ended Aug. 30 of 17 cents a share, contrasted with a loss in the corresponding period a year earlier.

* On the downside, Charles Schwab Corp. tumbled 2 5/8 to 19 7/8. Late Wednesday, the discount brokerage firm surprised investors with a projection of a 50% decline in third-quarter profit.

* Other securities industry stocks were mostly lower. Morgan Stanley fell 1 3/8 to 49 5/8; PaineWebber dropped 1/2 to 18 3/8; Salomon Inc. lost 1/4 to 35 3/4, and Bear Stearns fell 1/4 to 15 1/2.

* However, Merrill Lynch, which said it had not seen among its customers the mood of uncertainty reported by Schwab, gained 7/8 to 52.

* Cyclical stocks in industries such as metals and forest products made some of the biggest contributions to the Dow’s advance. Aluminum Co. of America rose 2 1/4 to 69 1/4, and International Paper gained 2 3/8 to 64 3/4.

* Airline issues also were strong, apparently on stepped-up recovery hopes. UAL rose 3 7/8 to 112; AMR added 1 5/8 to 61 1/4; Delta Air Lines gained 2 1/8 to 57 1/8, and USAir Group edged up 1/2 to 14 1/8.

* Other gainers among the blue chip industrials included Walt Disney, up 1 1/2 to 36 3/4; American Telephone & Telegraph, up 1 to 43 5/8; Goodyear Tire & Rubber, up 2 to 65 1/2, and Procter & Gamble, up 1 3/8 at 48 1/2.

* Pall Corp., traded on the American Stock Exchange, rose 1 3/4 to 28 1/2. The company posted earnings for the fiscal fourth quarter ended Aug. 1 of 42 cents a share, up from 35 cents in the like period a year earlier.

Overseas, stocks closed higher in London, with the Financial Times 100-share average rising 13.1 points to 2,340.6.

In Tokyo, the 225-share Nikkei average was up 32.92 points to 18,908.47.

Frankfurt’s 30-share DAX average bounced up 15 points from its low to end 3.03 up on the day at 1,528.29.

Credit

The price of the Treasury’s main 30-year bond was up 5/32 point, or about $1.56 per $1,000 in face amount. Its yield, which falls when prices rise, was 7.24%, up from 7.23% late Wednesday.

The President’s speech provided few new prospects for moving the economy, bond traders said. And news of a weak economy generally boosts bonds, since it increases the chances that the Federal Reserve will further lower interest rates. Lower rates benefit bonds.

Also pressuring bonds Thursday was an increase in corporate bond offerings, traders said. Bond underwriters often hedge corporate bond deals by selling Treasury securities, which puts pressure on Treasury prices.

Early in the day, the market ignored the Labor Department’s initial unemployment claims report.

The federal funds rate, the interest on overnight loans between banks, was unchanged from late Wednesday at 3%.

Currency

The dollar began to rise as Prime Minister John Major repeated Britain’s unwillingness to devalue the pound against other European currencies, said Steven Jonathan, a vice president of foreign exchange at Citibank.

Major said his government would not be pushed away from its goal of low inflation. He also said he would not press Britain’s partners in the European Monetary System for any sort of realignment, which could affect the dollar’s value.

News from Iraq also boosted the dollar, traders said.

In northern Iraq, what appeared to be an Iraqi F-1 Mirage fighter jet on Thursday crossed into the zone where the Allies previously imposed a flight ban to protect the Kurds, Pentagon spokesman Pete Williams said.

Williams said allied officials were not certain it was an Iraqi fighter, since others in the coalition protecting the Kurds fly such aircraft. Unrest generally causes investors to seek a safe haven currency such as the dollar.

In New York, the dollar closed at 1.421 German marks and 123.53 Japanese yen, up from 1.414 marks and 123.13 yen respectively.

The British pound was quoted at $1.965, down from $1.971 late Wednesday.

Commodities

Copper futures prices plunged sharply amid weak demand in the Far East, sluggish business activity in Western nations and the absence of any major economic incentives from Bush, analysts said.

On other markets, grain and soybean futures were lower, energy futures were mixed, and livestock and meat futures were mostly higher.

The December copper contract on New York’s Commodity Exchange lost 5% of its value in the three trading days so far this week. The biggest hit was Thursday, when the contract declined 2.85 cents to $1.0695 a pound.

Meanwhile, precious metals were unchanged to a little lower at the Commodity Exchange.

Gold for delivery in December was unchanged at $344.20 an ounce; December silver was 0.8 cent lower at $3.732 an ounce.

Energy futures were mixed on the New York Mercantile Exchange, with light, sweet crude oil for October delivery falling 6 cents to $21.93 a barrel.