FINANCIAL MARKETS : Chrysler Offer Sparks Rally; Dollar Drifts

A surprise takeover bid of $20.8 billion for Chrysler Corp. sent the auto maker’s shares soaring and sparked a modest rally in stock prices overall Wednesday, with most of the market’s major indexes moving ahead.

Bond prices also rose slightly while the U.S. dollar drifted mostly lower.

The Chrysler offer by billionaire Kirk Kerkorian, the auto maker’s biggest stockholder, did not trigger a wave of takeover interest in other auto-related stocks. But analysts said Kerkorian’s stated willingness to pay a 40% premium over Chrysler’s recent trading price gave the entire market a psychological lift.

The Dow Jones industrial average, after briefly trading above 4,200, closed with a 10.73-point gain at 4,197.81, nearly erasing its 11-point loss of the previous day.

Gainers outpaced losers 6 to 5 on the New York Stock Exchange, and Big Board composite volume totaled 400.6 million shares, up from 370.7 million on Tuesday.

Chrysler accounted for an astonishing 34 million of the NYSE shares traded Wednesday, and the stock’s price soared $9.50 a share to $48.75, after Kerkorian’s Tracinda Corp. announced its offer of $55 a share.

The last time a single stock had that much daily turnover was May 14, 1991, when 35.4 million shares of USX-Marathon Group changed hands, the NYSE said.

Trading was also heavy in shares of the other two big U.S. auto makers, General Motors and Ford, but GM edged up only 1/8 to 44 1/4 and Ford gained 7/8 to 27 5/8.

Automotive parts suppliers finished mixed. Superior Industries, a leading maker of wheels, gained 3/8 to 26, but car assemblies maker A.O. Smith was unchanged at 23. TRW, a leading maker of air-bag restraints and power-steering systems, fell 1 1/8 to 67.

Still, the broader market’s positive reaction to the Chrysler news dashed some traders’ expectations that stocks would struggle Wednesday. There has been widespread speculation recently that stocks and bonds, after rallying sharply in the first quarter, are poised to give ground.

But bond prices also edged higher after the government reported a slight 0.2% increase in U.S. consumer prices last month, a gain in line with economists’ expectations.

The bellwether 30-year Treasury bond rose nearly 0.25 point, or $2.50 for each 1,000 in face value, which pushed its yield down to 7.35% from 7.37% on Tuesday.

“Everybody . . . knows that stocks and bonds have had a big run and are vulnerable to profit taking,” said Alfred Goldman, market strategist at A.G. Edwards & Sons Inc. in St. Louis.

Yet with Kerkorian, “here’s a world-class investor who took a positive step” at a time when many are worried about a slowdown in auto sales and in the economy overall, and that “sparked interest in other stocks,” Goldman said.

To be sure, there is widespread skepticism on Wall Street that Kerkorian will in fact end up owning Chrysler, said Tom Gallagher, head of stock trading for Oppenheimer & Co. in New York. Kerkorian’s goal might be to flush out another buyer for Chrysler that would enable him to profit without having to run the company, he said.

Regardless, the billionaire’s public bid adds to the merger fever that’s helped push prices higher recently, Gallagher said. “There’s a growing feeling that all of these buyouts are a vote of confidence” in stocks, he added.

The market’s gains were not limited to the big industrial companies. Technology stocks also continued to rise, lifting the Nasdaq composite index to a record-high 828.53, up 3.70 points.

Standard & Poor’s 500-stock index gained 1.64 points to 507.17, and the NYSE composite index rose 0.75 points to 274.04--both new highs as well.

Among Wednesday’s other highlights:

* Boeing, a Dow industrials component, jumped 2 to 55 7/8 after United Airlines indicated it might soon place a larger order for new aircraft. United’s parent, UAL, rose 3 3/8 to 112 3/8.

* H&R; Block surged 4 1/4 to 46 1/4 after its president and chief executive, Thomas Bloch, announced his resignation.

* Foreign markets were mixed. London’s FTSE-100 average rose 18.90 points to 3,209.80, and Tokyo’s Nikkei 225-share average climbed 76.04 points to 16,344.92. But in Frankfurt, the DAX 30-share average fell 5.26 points to 1,988.47. The Bolsa index in Mexico City lost 35.01 points to close at 1,829.95.

In late currency trading in New York, the dollar was quoted at 1.3995 German marks, down from 1.4015, but the greenback edged up to 83.68 Japanese yen from 83.60.

Market Roundup, D6