FINANCIAL MARKETS : Stocks Rebound as Inflation Fears Recede

Stocks snapped out of a weeklong rut to end sharply higher Friday as investors put inflation jitters behind them and cheered a recovery in the bond market.

Despite the rally, blue-chip stocks still wound up with the biggest weekly loss so far this year.

The Dow Jones industrial average jumped 45.52 points to 5,532.59. For the week, it was down 150.29 points.

Although benign economic data may have paved the way for Friday’s comeback, it was “strictly a technical bounce,” said Larry Rice, chief investment officer at Josephthal, Lyon & Ross.

Stocks and bonds had been “very badly oversold,” Rice said. “There was nothing earthshaking in today’s [economic] data,” except that the numbers “did not compound the worries of yesterday.”

Technical or not, the advance was broad.

Advancing issues outnumbered decliners by nearly 2 to 1 on the New York Stock Exchange. Volume was strong at 411.95 million shares, but well below Thursday’s 519.66-million figure, the sixth-busiest day ever.

Broad market indexes followed the blue chips higher. The Standard & Poor’s 500-stock index rose 5.53 points to 636.71. The Nasdaq composite index rose 3.80 points to 1,100.94.

Stocks got a big boost from the bond market, where the 30-year Treasury bond rose 1.5 points, pushing its yield, which moves in the opposite direction, to 6.80%, down from 6.93% late Thursday and an eight-month high of 6.94% on Wednesday.

Bonds and stocks rose in earnest after the Federal Reserve Bank of Atlanta reported industrial activity in the southeast remains sluggish and that prices paid for industrial supplies were falling.

The Atlanta report was only one factor that cooled inflation fears that had caused the market’s rout earlier this week.

The Labor Department said consumer prices shot up 0.4% in March, slightly more than analysts had predicted. But excluding the volatile food and energy components, the so-called core rate of inflation was up only 0.3%.

In a separate indication that the economy may not be on an inflationary tear, the Commerce Department reported that retail sales rose just 0.1% in March.

And the University of Michigan’s consumer sentiment survey fell to 90.8% in March from 93.7% in February.

Among market highlights:

* The Dow industrials were led higher by stocks representing a diverse group of industries, including Sears, up 3 1/8 to 52; Boeing, up 2 3/8 to 81 1/2; J.P. Morgan, up 2 to 79 1/8; and McDonald’s, up 1 7/8 to 48 3/8.

* Interest-sensitive stocks, such as banking and finance companies and utility shares, gained as bond yields fell. Bankers Trust New York shares surged 2 to 69 1/8; Merrill Lynch added 1 1/2 to 57 3/4; and Fannie Mae added 1 1/4 to 30 5/8 after it reported Thursday a 15.5% gain in first-quarter profit.

* Computer-related stocks retreated, led by IBM, which dropped 6 to 111 1/2 after Smith Barney and SoundView Financial Group downgraded the shares.

* Oil stocks fell as oil prices stumbled on profit-taking by speculators. May crude futures fell $1.94 to $23.40 a barrel in New York. Chevron fell 1/2 to 55 3/8, Exxon 1/2 to 81 7/8 and Texaco 1 5/8 to 85.

Market Roundup, D4