Investors Push Doubts Aside, Blue Chips Past 7,300

Stocks rallied Thursday on the heels of encouraging economic data, sending blue-chip shares to record highs ahead of Tuesday’s Federal Reserve meeting.

But Hewlett-Packard’s poor earnings report, issued after the market closed, could hurt sentiment toward technology stocks today, some analysts warned.

Meanwhile, the dollar continued to slide against the Japanese yen, although it remained above a low of 114.6 yen reached in European trading.

On Wall Street, the Dow Jones industrials rallied late in the day to close up 47.39 points, or 0.7%, at a record 7,333.55. That topped the previous record of 7,292.75 set Monday and marked the Dow’s 19th record close this year.

The market’s breadth wasn’t particularly strong: Winners had only a narrow edge over losers on the New York Stock Exchange and on Nasdaq. Still, most broad stock indexes rose, with the Standard & Poor’s 500 index hitting a record high and the Nasdaq composite gaining 18.03 points to 1,353.58.

What’s more, the Standard & Poor’s index of 600 smaller stocks added 0.57 point to 148.80, joining the Dow at a new high. The S&P; small-stock index’s previous record was 148.60, set Feb. 19.

Stocks were supported by a modest bond rally after several government reports pointed to still-moderate inflation and a slowing U.S. manufacturing sector--evidence that might keep the Fed from tightening credit again when it meets next week. (Story, D3.)

One report showed U.S. industry operating at 83.4% of capacity in April, down from 83.7% in March.

With the economy appearing to slow, “the markets either don’t expect a Fed rate increase or they expect a benign one,” said Laszlo Birinyi, who runs his own research firm in Greenwich, Conn.

Bond yields initially jumped Thursday, then trended lower in the afternoon. The 30-year Treasury bond yield rose as high as 6.95% but closed at 6.86%, down from Thursday’s 6.88% and the lowest since March 11.

Markets also may have been helped late in the day by word of a definitive balanced-budget pact between President Clinton and Republican leaders of Congress.

For stocks, the dramatic rebound after the early-spring decline is once again raising worries about overvaluation, with many blue-chip stocks trading for well above 20 times annual earnings per share.

Meanwhile, a market landmark of a different sort occurred on Thursday: Bloomberg News calculated that General Electric became the first U.S. company to boast a market capitalization of more than $200 billion, after its shares climbed 1 1/8 to 62.

Among Thursday’s highlights:

* Blue chips leading the Dow higher included Caterpillar, up 2 1/2 to 98 3/8; Procter & Gamble, up 3 1/4 to 133 5/8; 3M, up 1 7/8 to 94 1/2; and Hewlett-Packard, which gained 2 1/4 to 58 7/8--before the company reported quarterly earnings well below expectations. (Story, D3.)

* Tech shares continuing to rebound included personal computer maker Gateway 2000, which soared 7 1/2 to 68 7/8 after announcing a 2-for-1 stock split and saying it will move from Nasdaq to the NYSE. Other gainers included Dell Computer, up 4 1/4 to 96 1/4; Intuit, up 3 3/16 to 27 1/8; Intel, up 5 3/8 to 158 1/8; and Western Digital, up 4 7/8 to 68 3/4.

* Edison International rose 3/8 to 22 7/8. The parent of Southern California Edison said it will buy back up to $1.5 billion of its shares.

In currency trading, the dollar closed at 116.10 yen, down from 117.20 on Wednesday and the eighth straight decline.

But the dollar edged up against the German mark. And traders noted that despite the slide against the yen in recent weeks, the dollar’s decline against other currencies has been relatively modest.

In commodity trading, coffee prices continued to rocket, hitting a 20-year high of $2.77 a pound on frantic buying by speculators amid shrinking world stockpiles.

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How the Dollar Has Slid

The dollar today buys about 9% fewer Japanese yen than it did on April 30, but the U.S. currency’s decline has been far less dramatic against most other major currencies.

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Per dollar Pct. Currency April 30 Thursday chng. Japanese yen 127.10 116.10 --8.7% Swiss franc 1.473 1.428 --3.1% French franc 5.834 5.713 --2.1% Canadian dollar 1.398 1.372 --1.9% German mark 1.730 1.698 --1.8% British pound 0.62 0.61 --1.6% Mexican peso 7.948 7.892 --0.7% Australian dollar 1.280 1.287 +0.5%

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Note: Exchange rates are for very large financial transactions.

Source: Bloomberg News