Stocks climbed to record highs Thursday for the third time in five sessions, powered by new evidence of a slowing economy that eased fears of inflation and higher interest rates.
The Dow Jones industrial average climbed 30.78 points to 4,069.15, topping the closing record of 4,048.75 set Tuesday.
Investors snapped up a wide variety of stocks, pushing three broad market indexes above their previous records as well. Today's expiration of stock index future contracts intensified the buying, analysts said.
The Standard & Poor's 500-stock index rose 3.53 points to 495.41, beating its previous record high, also set Tuesday, of 492.89. The Nasdaq composite of mostly smaller companies climbed 1.96 points to 809.34, breaking its record, set Tuesday, of 808.24. The NYSE composite index rose 1.77 points to 267.92, topping its record of 267.71 set Feb. 2, 1994.
Advancing issues led decliners by about 7 to 4 on the New York Stock Exchange. Big Board volume was heavy at 339.8 million shares, up from 337.15 million on Wednesday.
Stocks were aided by the bond market, which rallied sharply early in the day after the Federal Reserve Bank of Philadelphia released an economic report showing stagnant growth and easing price pressures in the region.
The report led investors to conclude that the national economy is not growing so fast that the Federal Reserve Board will be prompted to raise interest rates further in its campaign to contain inflation.
"There has been a reasonably good historical correlation (of the Philadelphia area report) to the country as a whole," said John Shaughnessy, research director at Advest Inc. in Hartford, Conn. "People are concluding from that that the Fed is well on its way to its soft-landing goals."
However, bond prices finished mixed; a steady climb early in the day was halted in the afternoon as people took profits on their holdings.
The yield on the Treasury's benchmark 30-year bond closed unchanged at 7.36%. Its price edged up 1/16 point, or 63 cents per $1,000 in face value.
The dollar also staged a moderate recovery, strengthened by the bond market's early rally. At the end of New York trading, the dollar was quoted at 90.25 Japanese yen, up from 89.45 on Wednesday. It closed at 1.396 German marks, up from 1.390.
The peso dropped 2.85% to finish at 7.15 pesos per dollar.
Investors have bid stocks to record highs in the past few sessions on the belief that the Fed may have indeed engineered a soft landing for the economy--that is, kept economic growth moderate and inflation low.
Should that turn out to be so, the Fed would be unlikely to tighten credit any further. Stock investors don't want to see more interest rate increases, because higher rates would raise corporate borrowing costs and eventually cut into profits.
The financial markets also responded to mixed signals from a group of economic reports issued before the markets opened.
The Labor Department said consumer prices climbed 0.3% in February, a figure in line with economists' expectations. But in a sign of economic weakness, the Commerce Department said housing construction plunged 2.6% in February to a seasonally adjusted annual rate of 1.32 million units, the slowest pace in a year.
The Labor Department also said new claims for unemployment benefits rose by 5,000 last week and that it marked the first time since early October that benefit claims had risen for two weeks straight.
Among Thursday's highlights:
* The Dow was led higher by IBM, up 1 3/4 at 83 1/2; Coca-Cola, up 1 3/8 at 58 1/2; Boeing, up 1 1/4 at 49 1/4, and Caterpillar, up 1 1/4 at 51.
* United Healthcare gained 2 3/8 to 46 7/8, U.S. Healthcare rose 2 1/2 to 44 3/4 and Columbia/HCA Healthcare gained 1 3/4 to 40 1/2.
* U.S. Shoe rose 1 to 25 3/4 after it said its directors had rejected as inadequate Luxottica Group's unsolicited takeover offer of $24 per share and that it had decided to sell its footwear division to competitor Nine West for $600 million. Luxottica shares fell 1 3/8 to 32 7/8 in U.S. trading. Nine West rose 2 1/4 to 30 1/2.
* RJR Nabisco ended off 1/8 at 5 5/8. Kohlberg, Kravis Roberts said Wednesday that it has sold its remaining 8% stake in RJR and given the stock to its recently purchased Borden unit.
* Paper stocks fell after Merrill Lynch lowered its long-term rating on 10 paper companies. Stone Container fell 1 3/8 to 19 7/8. Willamette Industries slid 1 to 50 3/4.
* Drug stocks rose on news that a study found that drug prices have risen faster than the rate of inflation. Merck rose 3/8 to 43 1/4; Pfizer added 1 1/4 to 84 3/4; Lilly edged 1/4 higher to 68 3/8.
* Telefonos de Mexico fell 3/8 to 26 1/8, in concert with the Mexican stock market. The Bolsa index closed at 1,589.58, off 22.15 points.
Other overseas markets were mixed. The London FTSE-100 index closed up 47.1 points at 3,094.1. In Frankfurt, the DAX 30-share average ended 18.08 points lower at 1,992.06. Tokyo's 225-share Nikkei average fell 311.15 points to 16,355.68.