FINANCIAL MARKETS : Program Trades Boost Dow 23 to Record High

Market Overview

Highlights of Thursday’s market activity, compiled from Times staff and wire reports:

* Stocks advanced broadly for a second day, though the Dow industrials’ gain occurred almost entirely in the last few minutes of trading, thanks to computer-directed buy programs. Smaller stocks shot up, and NASDAQ trading volume hit a record.

* In another volatile session, bond yields finished higher on a late surge after news of a big jump in the nation’s money supply.

* Gold prices inched up, as sellers failed to beat back the metal’s recent advance.

Stocks

The market opened higher after Wednesday’s surprise rally that saw the Dow Jones industrials leap 55.64 points.

But as trading wore on, blue chips languished only slightly above Wednesday’s levels. The broad market, however, continued to surge.

In the final minutes of trading, the Dow shot higher, apparently the result of computerized buy programs. The Dow closed up 23.25 points to a new high of 3,523.28.

Traders said the late buy programs were probably the work of big investors who own indexed portfolios. They often increase their positions in stocks across the board as the market advances.

Overall, the market’s continuing strength was impressive, analysts said. Winners topped losers 1,137 to 773 on the New York Stock Exchange, though volume fell to 289 million shares from Wednesday’s 342 million.

Buyers were more active in the NASDAQ market of smaller stocks. The composite index jumped 7.00 points, or 1%, to 697.43, and trading volume reached a record 343 million shares, though it was swelled by wild activity in one small stock.

Analysts said the market had been primed for an advance because of excessive bearishness in recent weeks and heavy “short” selling by traders betting on a steep market decline.

When fears about higher inflation began to abate on Wednesday, a stock-buying stampede ensued.

Hugh Johnson, chief investment officer at First Albany Corp. in Albany, N.Y., said Wednesday’s gains were “a classic trading rally from an oversold condition.”

But he remains concerned that any new spike in interest rates could interrupt stocks’ rally.

Some analysts say the bulls are kidding themselves. “We’re in the process of denial,” said Michael Metz, market strategist at Oppenheimer & Co. “We have a whole country that’s denying that we have a deficit problem and an inflation problem.”

Among the market highlights:

* Technology stocks again led the market higher, on optimism about strong computer sales. Apple rose 1 1/2 to 58 3/4, Cadence Design gained 1 1/8 to 11 7/8, Sun Microsystems surged 2 1/8 to 30 3/4, Microsoft added 1 5/8 to 94 1/8, and Sybase gained 1 7/8 to 71 1/2.

Also, software giant Computer Associates jumped 1 1/4 to 30 after reporting surprisingly strong quarterly earnings.

* Industrial stock winners included 3M Co., up 1 5/8 to 115 1/4; Caterpillar, up 7/8 to 69 5/8; Deere, up 3/4 to 58; Superior Industries, up 1 5/8 to 47 3/8, and Monsanto, up 2 to 57 1/2.

* Many growth stocks rallied sharply in such fields as entertainment and restaurants. Casino stocks, for example, soared. Mirage leaped 3 3/8 to 44 3/4, Caesars gained 1 3/8 to 49 1/8, Circus Circus added 1 7/8 to 51 5/8, and Players International zoomed 2 1/4 to 20.

Among restaurant issues, Checkers gained 1 to 24 1/2, Cheesecake Factory rose 1 1/2 to 33 1/2, and Outback Steak was up 3/4 to 36 1/4.

* Studio and cable TV stocks also were hot, including Disney, up 2 1/2 to 44; Paramount, up 1 1/2 to 54; Time Warner, up 1 to 37 1/4, and Tele-Communications, up 1 1/4 to 21 1/4.

* Pacific Enterprises rose 3/4 to 22 3/8 in heavy trading. The parent of Southern California Gas Co. priced 7 million new common shares at 21 5/8 each. Proceeds from the offering will be used to repay debt and for other corporate purposes.

* On the downside, Spectrum Information Technologies plunged on the NASDAQ, setting a record for the most NASDAQ shares traded in a single day. The data communications firm’s stock sank 5 3/4 to 6 on volume of 34 million shares on fears that a recent equipment deal with AT&T; won’t be as lucrative as expected.

Overseas, London’s Financial Times 100-share average shed 2.9 points, ending at 2,816.8. The Frankfurt bourse was closed for the Ascension Day holiday.

In Tokyo, the Nikkei average lost 50.40 points to finish at 20,330.39.

Credit

For most of the day bonds drifted in listless trading. But the Federal Reserve’s money supply statistic triggered a late selloff by reigniting fears that the U.S. economy is heating up--and thus that inflation is headed higher.

The yield on the Treasury’s key 30-year bond jumped to 6.99% from 6.97% Wednesday.

Earlier Thursday, a modest jump in the number of people filing first-time claims for jobless benefits barely dented bond trading.

But at the tail end of trading, the Federal Reserve reported that one of the most closely followed measures of the money supply, M2, surged a larger than expected $20.1 billion to $3,501.9 billion in the week ended May 10.

The change in M2 exceeded many economists’ expectations and was seen as yet another indication that the U.S. economy may be entering a new climate of faster growth and thus higher inflation.

Such an environment could spur the Federal Reserve to raise interest rates to contain inflation--which is exactly the fear that had riled the bond market in recent weeks, before rates fell back on Wednesday.

Other Markets

The dollar’s weakness was exaggerated by a lull in European activity, where many financial markets were closed in observance of Ascension Day.

But the German mark’s gains against the dollar were muted because of cross-trading, or non-dollar trading, in which players sold marks to buy British pounds.

In New York, the dollar settled at 110.65 Japanese yen and 1.619 German marks, down from late Wednesday’s 110.75 yen and 1.624 marks, respectively.

Meanwhile, in commodities trading, light, sweet crude oil for June delivery rose 39 cents on the New York Merc to $19.54 a barrel

Gold gained 50 cents an ounce to $374.20 on the Commodity Exchange. Silver for current delivery slipped 1 cent to $4.51.

Market Roundup, D6