Dow Breaks 3,900 Barrier; Bond Yields Up

Market Overview * The Dow Jones industrial average punched through 3,900 on Friday, ending above the milestone for the first time in a rally fueled by heavy options trading.

* Bond yields rose on fears of inflation and speculation that Japanese investors would take profits.

Stocks

The Dow rose 22.52 points to 3,914.48, a new high. It rose 47.28 points in the week. It was the blue-chip index’s ninth new high of the year.

Industrial stocks were favored at the expense of financial and utility shares, analysts said. That was reflected in the broader market, where losing issues edged out gainers 1,060 to 973.

The Nasdaq composite closed at its second straight record high, rising 1.25 points to 794.28.

Volume, which has almost consistently been over 300 million per session since New Year’s Day, was 343.6 million on the New York Stock Exchange. The expiration of January options helped send volume soaring, analysts said.

The Dow’s climb continued to defy those on Wall Street warning it was setting itself up for a fall.

“There’s no sign of the end of this relentless climb up the wall of worry,” said Anthony Hitschler, president of Brandywine Asset Management Inc.

Caterpillar helped propel the Dow, rising 4 5/8 to 98 5/8 after reporting better than expected quarterly earnings and projecting a higher profit in 1994. Bethlehem Steel gained 1 1/8 to 23 5/8.

While investors continued to plow money into stocks expected to benefit from the economic recovery--so-called cyclical stocks--some analysts expressed concern over the market’s overall mixed tone.

Among the market highlights:

* Apple Computer reported earnings above Wall Street’s consensus forecast and the stock jumped 3 1/2 to 33 3/8. Other computer makers showed strength, including Compaq, up 2 3/4 to 82 1/2, and Hewlett Packard, which added 1 5/8 to 84 3/4. Silicon Graphics advanced 2 to 24 7/8 after reporting a rise in quarterly earnings.

* General Dynamics fell 2 1/4 to 92 1/4. Cowen & Co. downgraded its rating on the stock. The company said it was disappointed that Sweden rejected its M-1A2 Abrams tank in favor of the German Leopard tank.

In overseas markets, London’s FTSE 100 index gained 14.2 points to 3484.2, up 83.6 points in the week. In Tokyo, the Nikkei average closed up 123.51 points at 19,307.43, a rise of 333.73 from last week.

Other Markets

Bond yields rose on fears that Japanese investors would take profits after the government’s reform bill was defeated in the Upper House of Parliament on Friday.

The yield on the bellwether 30-year Treasury bond rose to 6.28%, up from 6.27% at Thursday’s close.

Astrid Adolfson, economist at MCM MoneyWatch, said that if the Japanese stock market takes a nose dive Monday, investors in Tokyo could take profits on their U.S. Treasury bond holdings.

The dollar rose to 111.57 Japanese yen and 1.7524 German marks in late New York trading, from 111.37 yen and 1.7375 marks Thursday.

At New York’s Commodity Exchange, March silver fell 15.3 cents to $5.122 an ounce. February gold dropped $6.20 to $381.70 an ounce, the lowest price in more than a month.

Gold prices rose to a high of $407 an ounce in late July based on perceptions that the stock and bond markets had peaked and inflation pressures might reignite.

Energy prices stabilized after a hectic week generated by an Arctic cold mass that froze the eastern half of the nation. February heating oil firmed 0.07 cent to 48.03 cents a gallon, while February natural gas lost 9.5 cents to $8.56 per 1,000 cubic feet. March crude oil declined 2 cents to $14.94 a barrel and February unleaded gas rose 0.10 cent to 42.04 cents a gallon.

Market Roundup, D4