Stocks Recover to New Highs; Bonds Steady

Stocks closed higher Friday, reversing the market’s one-day slide and gaining just enough to close the week at record highs. Bonds ended little changed.

The Dow Jones industrial average rose 90.93 points to 9,167.50, erasing Thursday’s 85-point drop and squeaking past Wednesday’s record close of 9,162.27.

Most broad-market measures also set new highs by a narrow margin as Wall Street quickly shrugged off a brief bout of renewed worry about Japanese and Asian recovery efforts.

“It’s a nice recovery, but I don’t know if you can read too much into it. It’s far from trouble-free because the good stocks are almost too good and the bad stocks have not done much,” said Frank Gretz, a market analyst at Shields & Co.

Stocks opened lower after a second straight day of sharp declines in Tokyo and Europe, but the U.S. market quickly turned around as prices, particularly on consumer issues that had fallen out of favor in recent days, began looking attractive.

Treasuries barely noticed U.S. economic data on the trade deficit and industrial production, analysts said.

The U.S. trade deficit swelled 4.2% in February to $12.1 billion, approaching the record levels of the late 1980s, the Commerce Department said.

In the report on industrial production, the Federal Reserve Board said output at the nation’s mines, factories and utilities edged up a modest 0.2% in March, mostly because cooler weather boosted demand for heat and electricity.

Advancing issues outnumbered decliners by a 3-2 margin on the New York Stock Exchange, where trading was very heavy for the second straight day.

The Standard & Poor’s 500-stock list rose 14.55 points to 1,122.72, barely edging past the April 3 record close of 1,122.70. The NYSE composite index rose 7.20 points to 584.11, beating that measure’s previous best close of 583.17 on April 6.

The Nasdaq composite index rose 8.36 points to 1,866.60, topping Thursday’s record finish of 1,863.26. The Russell 2,000 index of smaller companies rose 2.60 points to 487.01, slightly shy of Wednesday’s record of 487.12.

In the bond market, MCI Communications sold $1.2 billion in bonds, while long-term U.S. Treasury yields hovered below 6% for a sixth straight week.

The No. 2 long-distance telephone carrier’s sale--20% more than expected--added it to a growing list of companies taking advantage of low interest rates. Demand for corporate debt has been robust recently as investors reach for higher yields than those offered by Treasury bonds.

The price on the benchmark 30-year Treasury bond barely edged lower, leaving its yield unchanged at 5.87%.

Among Friday’s highlights:

* Leading the Dow’s advance was American Express, up $4.63 to $107 after reports that the company might merge with American International Group to compete with the financial services behemoth that would be created by the proposed merger of Citicorp and Travelers Group.

J.P. Morgan also gave the Dow a boost, rising $1.88 to $144.75; Merrill Lynch rose $2.81 to $94.81.

The Dow’s other big gainers included Procter & Gamble, up $2.25 to $85.13, and Coca-Cola, up $2 to $16.81.

* Drug stocks rose after falling for seven of the last eight days. Eli Lilly rallied $5.13 to $68.38 on expectations that a new study will show that its Evista drug will help prevent cancer. Pfizer, which is developing a similar drug, gained $4.50 to $105.19. Johnson & Johnson added $2.56 to $72.56.

* Internet-related issues fell after Excite reported a wider loss and warned it might not be able to sustain its growth. Excite plunged $15.81 to $75.31, Yahoo lost $6.89 to $121.50, and Infoseek lost $7.50 to $36.69.

But K-Tel International, which tripled this week amid excitement about its plans to sell music on the Internet, rose another $7.56 to $28.69. A week ago Wednesday, just 300 shares changed hands, at $6.63.

In currency trading, the dollar rose against the mark as Germany’s central bank kept interest rates steady; it ended little changed against the Japanese yen amid warnings from Tokyo that Japan might help support the currency.

The dollar rose to 1.8090 German marks late in New York from 1.8045 on Thursday. It remained at 131.79 yen.

Market Roundup, D4