Late Surge Puts Dow Up 103, Within 2% of Record High

Blue chip stocks closed out another winning week with a big advance on Friday, lifting the Dow Jones industrial average to within 2% of its record high set last July.

Smaller stocks weren’t as strong on Friday, but still closed higher for the week, bolstered by the Federal Reserve’s decision on Tuesday to cut interest rates for the third time in eight weeks.

The Dow rose 103.50 points, or 1.1%, to 9,159.55, helped by hefty gains in many foreign markets, as investors’ optimism about the global economy’s prospects continues to rebound.

“Six weeks ago, no one would have dreamed we would have come back so fast” from the calamity that struck markets in August and September, said Alfred Kugel, investment strategist at mutual fund firm SteinRoe & Farnham Inc. in Chicago.

Battered by worries over Asia, Russia and Latin America, the Dow plunged 19.3% from its peak on July 17 to its closing low on Aug. 31, rebounded somewhat, then tumbled again by early October.

Since Oct. 8 the Dow has soared 1,427 points, or 18.5%. It is now less than 179 points from its July 17 record high of 9,337.97, and is up 15.8% year-to-date.

Likewise, the blue chip Standard & Poor’s 500 index, which rose 1% on Friday, is within 2% of its record high, also set on July 17. Since Dec. 31 it has gained 19.9%.

“The real changes are that the authorities in all parts of the world are taking steps to head off the worst fears that people had of a global deflationary recession,” Kugel said.

In Japan, Prime Minister Keizo Obuchi agreed Thursday to consider cutting income taxes further and revising a controversial sales tax to help pull the economy out of recession.

Japan’s main stock index, the Nikkei-225, jumped 3% on Friday to 14,779.94, its highest level since Sept. 8. It has risen 14.7% since Oct. 9.

Brazil’s stock market also continued to rebound, rising 2.6% on Friday, as the country’s benchmark interest rate fell for an eighth day. A new $41.5-billion international aid package for the country has reduced its need to protect its currency with high rates.

The bulls also were running in European stock markets on Friday, with Germany up 2.4%, France up 2.6% and Britain up 2%.

On Wall Street advancing issues outnumbered decliners by 18 to 13 on the New York Stock Exchange and by a narrower margin on Nasdaq.

The Nasdaq composite index gained 0.4%, but for the week was up 4.3%. It’s up 22.8% year-to-date and is a 4.5% rise away from its record high.

The only relative worry lately, analysts say, has been the weak performance of smaller stocks, which had led the rebound for most of October.

The Russell 2,000 small-stock index eased fractionally on Friday and rose 1.3% for the week. It’s still down 9.8% year-to-date.

In the Treasury bond market yields were mostly unchanged on Friday, with the bellwether 30-year T-bond yield easing to 5.22% from 5.24% on Thursday and 5.25% a week ago.

The bond market had little reaction to the Fed’s latest rate cut this week because it was anticipated--and because the central bank also signaled that it may be finished cutting rates in the near term.

Many investors now are favoring corporate bonds over Treasuries, wagering the Fed’s three rate cuts will keep the economy and corporate profits on track.

The stock market, meanwhile, is entering a seasonally strong period--which suggests a new high on the Dow may be easily achievable.

“Thanksgiving and Christmas time is a good time for the markets,” said Charles Pradilla, chief investment strategist at SG Cowen Securities.

“We seem to have gotten the end-of-year tax-loss selling over early, and the news has just gotten better and better.”

Among Friday’s highlights:

* Banks and other financial stocks were among the front-runners, as worries about the economy recede.

Merrill Lynch surged $4.38 to $71.63, Bankers Trust jumped $5.25 to $77.25, Lehman Bros. rose $3.50 to $45.69 and J.P. Morgan gained $3.25 to $109.63.

* The tech sector was led by IBM, up $1.56 to $160.13; Autodesk, up $4.19 to $35.19; and Motorola, up $3.38 to $61.63.

The Internet sector also was mostly higher. Amazon.com continued its amazing climb, rising $27.38 to a record $180.63 after the company declared a 3-for-1 stock split late Thursday.

Also, EBay surged $3.25 to $147 and Yahoo was up $5.13 to $191.

* Drug stocks attracted investors again, with Johnson & Johnson up $2.38 to a record $89 and Pfizer up $1.31 to $111.88.

* In the industrial sector, DaimlerChrysler jumped $3.50 to $91.63 after the world’s No. 5 auto maker said it plans to spend $40 million to expand its Tuscaloosa, Ala., plant to keep up with demand for its Mercedes-Benz M-Class sport-utility vehicle.

* Some oil stocks gained on expectations that the Organization of Petroleum Exporting Countries may consider more production cuts when its members meet next week in Vienna to drive crude prices higher.

Crude oil futures eased 1 cent to $12.14 a barrel in New York.

Exxon rose $2.13 to $72 and Royal Dutch Petroleum gained 94 cents to $47.75.