IBM, Rate Drop Propel Dow to Another High

The Dow Jones industrial average on Tuesday raced to its 40th record close this year, propelled by another drop in long-term interest rates and a rally in the stock of International Business Machines Corp.

The blue-chip Dow ended up 50.69 points at 6,397.60, setting its ninth record out of the past 10 trading sessions, and beating Friday’s high of 6,348.03.

It slipped 1 point Monday after rallying more than 350 points in the previous two weeks.

Broader measures also moved to record levels after a one-day pause, with technology, energy and financial stocks leading the way. But the continuing blue-chip emphasis of the market’s postelection rally raised more doubts about how much longer this leg of the bull market could last without at least a minor pullback.

“It’s been narrower and narrower in terms of the stocks participating in the market’s rise,” said Richard E. Cripps, chief market strategist for Legg Mason of Baltimore. “The Dow’s rise is still not pulling the rest of the market with it. Usually, it’s that sort of divergence that marks the end of a run in the market.”

IBM rallied 6 3/4 to 153 3/4, climbing nearly 20 points since Thursday as Wall Street analysts raised their price targets for the giant computer maker’s stock.

In the bond market, the 30-year Treasury bond rose 7/16, sending its yield down to 6.43% from 6.46% at Monday’s close.

Yields on two-year Treasury notes fell at auction to the lowest level since February. The high yield was 5.662%, down from 5.930% at the last auction on Oct. 22. It was the lowest rate since two-year notes sold for 5.235% on Feb. 27.

A total of $18.3 billion in notes was sold out of bids totaling $38.4 billion.

Bond prices rose after the Commerce Department reported that October housing starts fell 5.1% to an annualized 1.366 million rate, the lowest since October 1995.

“The bond’s going to 6%, so you’re not making money there,” said James Cramer of Cramer Co.

In the broader market, advancing issues led declines 1,435 to 1,008 on active volume of 454 million shares on the New York Stock Exchange.

The Standard & Poor’s composite index of 500 stocks rose 5.14 points to 742.16, topping the old record close of 737.62 set Friday. The New York Stock Exchange composite gained 1.90 points to 391.80, also topping Friday’s record of 390.02.

The Nasdaq composite index rose 8.05 points to 1,262.62. The American Stock Exchange index edged up 0.46 to 584.64 points.

Among Tuesday’s highlights:

* Along with IBM, a number of high-tech stocks were also big gainers, with Microsoft surging 5 1/2 to 155 7/8, Intel up 5 3/8 to 120 3/4 and Dell Computer soaring 8 1/4 to 97 3/4 as three of the Nasdaq’s four most active issues.

On the NYSE, Compaq rose 4 3/8 to 80 1/2. Hewlett-Packard rose 3 to 52 3/4, after analysts said they expected the computer maker to post stronger results next quarter after posting disappointing fourth-quarter earnings.

* Kmart rose 1 1/2 to 11 1/8 on speculation that it was in takeover talks with Kohlberg Kravis & Roberts. Both companies declined to comment.

* Restaurant chain Rainforest Cafe lost 2 1/4 to 28 1/4 on news that its president and chief operating officer had taken a 30-day leave of absence for personal reasons.

* The nation’s third-largest bank, BankAmerica, rose 2 to 98 after unveiling a program to award stock options to 91% of its employees during the next three years as an incentive to increase productivity and improve customer service.

* Heartstream lost 9/16 to 15 7/16 despite receiving a contract to provide AMR’s American Airlines with 300 of its portable heart-resuscitating devices. Its share price rose 21% in anticipation of the announcement.

Overseas, Tokyo’s Nikkei stock average rose 0.8%, Frankfurt’s DAX index ended slightly higher and London’s FT-SE 100 gained 0.4%.