Dow Surges Higher Despite High-Tech Slump

Blue-chip stocks pushed higher into record territory Wednesday on the hope of lower interest rates, but technology stocks depressed the broader market.

The Dow Jones industrial average rose 18.06 to 5,041.61. That was less than half its intraday gain of 44 points, but still far above the previous record high close of 5,023.55 set Tuesday.

Having closed for the first time above 5,000 on Tuesday, the blue-chip index glided smoothly past that benchmark and on to higher ground, with economically sensitive issues leading the advance.

“The market is placing a bet on a couple things, and it’s a dicey bet,” said Alfred E. Goldman, vice president at A.G. Edwards & Sons Inc. in St. Louis.

Investors are betting that once Congress and the White House agree on a budget, the Federal Reserve will lower interest rates, and that as a result of the lower rates, “the economy kicks up into a moderately higher gear,” Goldman said.

Cyclical stocks, which tend to respond first to changes in the economy, should benefit the most from lower interest rates and were thus bid higher, Goldman said.

Although the Dow components were showing remarkable resilience, the market gains were narrow. Advancers had a tiny lead on declines on the New York Stock Exchange. Volume was heavy at 404.9 million shares on the Big Board, but that was below Tuesday’s pace.

Some of the stocks that moved substantially Wednesday:

NYSE

Telefonos de Mexico’s American depositary receipts rose 1-5/8 to 29-7/8.

Mexican stocks opened sharply higher on heavy buying by foreign investors and a sharp drop in interest rates.

Harrah’s Entertainment rose 1-3/8 to 25.

The Memphis operator of casino hotels and riverboat casinos said it will write off its investment in Harrah’s Jazz Co., a New Orleans partnership which filed for bankruptcy protection. Harrah’s Entertainment said it will take a charge of 55 cents to 60 cents in the fourth quarter for the write-off. Bear Stearns downgraded the company’s stock to “neutral” from “attractive.”

Humana rose 1-1/8 to 24-3/8.

The stock will be added to the Standard & Poor’s 500 index at the end of the month.

Fred Meyer Inc. rose 1-1/2 to 22-1/4.

CNBC financial correspondent Dan Dorman reported rumors that Kohlberg Kravis Roberts, which already owns 38 percent of the Portland-based retailer, may try to buy the rest of it.

NASDAQ

Amerin Corp. rose to 20 from an original price of 16.

The Chicago insurance holding company priced an initial public offering of 11.6 million common shares, increased from 11.15 million, at $16 apiece.