Blue Chips Rally; Broad Market Mixed

Blue-chip shares advanced for a third straight session on Friday, lifting the Dow Jones industrials to a 4% gain for the week--as late October’s mini-crash continues to recede from view.

The Dow index added 54.46 points to 7,881.07 on Friday, in a volatile session marked by the monthly expiration of key stock options contracts. Such expirations often lead to wild swings.

The broad market wasn’t as strong, however. The Nasdaq composite fell 5.81 points to 1,620.75, as losers topped winners by 22 to 19 on Nasdaq.

Still, for the week the Nasdaq index gained 2.4%.

Blue chips, however, were clearly in greater demand than many smaller stocks, as investors continued to shake off concerns that Asia’s financial debacle will translate into severe problems for the U.S. economy in 1998.

The Dow rose 308.59 points for the week, and erased the last of the 554-point loss suffered on Oct. 27, when Asia’s turmoil triggered panic selling.

Yet there was more bad news from Asia on Thursday, as South Korea lined up for an international bailout and Yamaichi Securities, one of Japan’s “Big Four” securities houses, said it plans to shut down.

“In light of the fact that you have a major Japanese securities firm throwing in the towel, today’s rally is fairly decent,” said Charles White, portfolio manager at Avatar Associates. “We’ve started to see the impact of Asian markets muted here. While there’s still some sensitivity, it’s not as pronounced as before.”

Some analysts say U.S. stocks are gaining because Wall Street is perceived as a “safe haven” given the problems in Asia, which also have slammed Latin America in recent weeks.

Still, key Latin markets joined Wall Street in rallying Friday, with Mexico’s main share index up 3.3% and Brazil’s up 3.1%.

Japan’s stock market also gained, with the Nikkei-225 index rising 2.5%.

U.S. stocks were also supported by another decline in long-term bond yields. The bellwether 30-year Treasury bond yield sank to 6.03% from 6.06% on Thursday, and is now the lowest in 21 months.

Still, concern that Japan and other Asian countries may sell Treasury bond holdings to raise cash has some analysts unwilling to make a big bet that interest rates will move down much further.

Among Friday’s highlights:

* The biggest Dow gainers included Disney, up $4.06 to a record $94.75; Merck, up $2 to $94.56; Exxon, up $1.25 to $63.94; and DuPont, up $1.25 to $62.50.

* The Dow utilities average, whose strength is seen by some money managers as a harbinger of lower interest rates, set a record for the first time since Sept. 13, 1993. It rose 1.23 points to 256.75.

* Airline shares also rallied, with AMR, parent of American, up $1.50 to $121.44 and Delta up $3.19 to $110.06.

* Tech stocks generally were weak, with Applied Materials off $1.25 to $36.38 and Compaq down $2.81 to $63.69.

But Internet software maker RealNetworks, making its initial public offering, soared $5.38 to $17.88 on its first day of trading.

In commodities trading, silver jumped as speculators bet that strong demand and tight stocks would push prices higher.

But copper prices fell to near a four-year low on worries about slowing economic growth across Asia.

Market Roundup, D6