U.S. stocks climbed to record highs Thursday for the third time in five sessions, powered in part by new evidence of a slowing economy that eased fears of higher interest rates.
The Dow Jones industrial average jumped 30.78 points, or 0.8%, to 4,069.15, topping the record of 4,048.75 set Tuesday.
Investors snapped up a variety of stocks, pushing broader market indexes to new highs as well. But some analysts said activity may have been skewed by technical trading related to today's quarterly expiration of major stock index options and futures contracts.
In the bond market, meanwhile, yields closed flat or slightly higher after a strong early rally faded. The yield on the Treasury's 30-year bond, which plunged as low as 7.29% by midday, closed at 7.36%, unchanged from Wednesday.
The dollar staged a moderate recovery, strengthened by the bond market's early rally. In New York, the dollar rose to 90.25 Japanese yen from 89.45 on Wednesday, and to 1.396 German marks from 1.390.
Analysts said both stocks and bonds were lifted early in the day by the latest economic reports, which, like many statistics of recent weeks, suggested that growth is slowing from 1994's torrid pace.
Investors are counting on an economic slowdown--a so-called soft landing--to allow interest rates to stabilize or fall further and to ease inflationary pressures.
In a well-received report Thursday, the Federal Reserve Bank of Philadelphia said its latest review of that region's manufacturing economy shows virtually stagnant growth and easing price pressures.
"There has been a reasonably good historical correlation (of the Philadelphia-area report) to the country as a whole," said John Shaughnessy, research chief at Advest Inc. in Hartford, Conn. "People are concluding from that that the Fed is well on its way to its soft-landing goals."
But the Philadelphia Fed report was somewhat contradicted by the government's report on consumer price inflation for the economy as a whole in February. Prices rose 0.3% last month, the same as January and above many analysts' estimate of 0.2%.
Still, most of the recent reports "confirm an economic slowdown," said Timothy Straus, manager of institutional sales at Hancock Institutional Equity in Boston.
While inflation could run slightly higher this year than last year's 2.7% because of pent-up price increases in the economy, most analysts don't see it causing major problems for financial markets.
In any case, many traders say the stock market in particular may be carried higher at least through the end of the first quarter by sheer momentum, as more investors who've sat out this surprising rally begin to pile in.
On Thursday, winners topped losers by about 7 to 4 on the New York Stock Exchange in active trading of 339.8 million shares.
The Standard & Poor's 500 index hit a record, rising 3.53 points to 495.41, and the Nasdaq composite index of mostly small stocks added 1.96 points to a record 809.34.
Also, the NYSE composite finally topped its old peak of 267.71 set Feb. 2, 1994. It rose 1.77 points to 267.92.
Already this year, the S&P; index has surged 7.9% in price while the Dow is up 6.1% and the Nasdaq index is up 7.6%.
Among Thursday's highlights:
* The Dow was led higher by an eclectic mix of companies, including 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.
* Health care stocks rallied broadly, which some analysts said reflected investors' search for companies that may perform well in a slower economy. Warner-Lambert gained 5/8 to 77 5/8, United Healthcare jumped 2 3/8 to 46 7/8, Columbia/HCA Healthcare rose 1 3/4 to 40 1/2 and Pfizer was up 1 1/4 at 84 3/4.
* Other buyers focused on issues that normally do best in a stronger economy. Deere jumped 1 3/8 to 76 3/4, PPG Industries rose 3/4 to 36, Black & Decker surged 1 1/8 to 28 and Dow Chemical was up 1 1/8 at 68 5/8.
But paper and lumber stocks fell after Merrill Lynch lowered its long-term rating on 10 companies. Stone Container dropped 1 3/8 to 19 7/8, Willamette Industries eased 1 to 50 3/4 and Weyerhaeuser was off 3/4 at 37.
* 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. Luxottica shares fell 1 3/8 to 32 7/8 in U.S. trading. Nine West rose 2 1/4 to 30 1/2.
* Among Southland issues, golf club shaft maker Aldila jumped 1 to 6 3/4 on takeover rumors that named Callaway Golf as a possible bidder. Callaway did not deny the rumor outright, but cautioned investors against speculating about what it might or might not do. Callaway shares were unchanged at 16.
In foreign trading, Mexico City's Bolsa index suffered another loss as the peso weakened again, to 7.15 to the dollar. The Bolsa slumped 22.15 points to 1,589.58.
Elsewhere, London's FTSE-100 index rocketed 47.1 points to 3,094.1, helped by Wall Street's gains. In Frankfurt, the DAX index eased 18.08 points to 1,992.06.
In Tokyo, the 225-share Nikkei average tumbled 311.15 points to 16,355.68.