Bond Market Rally Lifts Dow To Record High

Stocks shot to record levels Friday, spurred by a powerful recovery in the bond market.

The Dow Jones industrial average rose 54.92 points to 5,271.75, setting its third record in a week in which the blue-chip average climbed 87.07 points.

Advancing issues lagged decliners for most of the day but pulled ahead in the final hour of trading. Volume was active at around 384.42 million as of 4 p.m., but far below Thursday’s pace.

Stocks were led by bonds, which ended a see-saw session up nearly a point after being down about a point as the day began.

Bond investors started the day disappointed that the temporary budget pact worked out by the president and Congress could delay or kill efforts to balance the budget in the next seven years.

But by the afternoon the sentiment shifted to a growing belief that the budget pact would pave the way for the Federal Reserve to once more reduce interest rates, assuming economic reports early next week continue to show a weak economy.

The prospect of lower interest rates was enough to send bonds higher, and stocks along with them.

Alan Ackerman, senior vice president at Fahnestock & Co., explained the rise in technical terms: “We have those who are willing to buy on the fact that the market continues to be resilient. On weakness, bargain-hunting seems to have worked so far.”

Some of the stocks that moved substantially Friday: NYSE

Delta Airlines fell 3-1/4 to 68-5/8.

Second-quarter earnings were 93 cents a share, compared with a year-earlier net loss of 79 cents. But the results were substantially below analysts’ estimates of $1.16. And Delta said it expects to write down the value of its aging L-1011 fleet.

McDonald’s rose 1-3/4 to 50-1/4.

Fourth-quarter profits rose 19 percent to 51 cents a share from 43 cents a year earlier. Revenue rose 14 percent.

Exide fell 14-3/4 to 33-3/8.

The company projected that results for its third quarter ended Dec. 31 would fall short of analysts’ expectations, and that it will cut 500 jobs in North America and 200 in the United Kingdom by March 31. Based in Bloomfield Hills, Mich., the company makes acid lead batteries.

NASDAQ

Gateway 2000 rose 5-1/2 to 25-3/4.

The computer-maker’s fourth-quarter net profits were 74 cents a share, up from 50 cents a year ago.

Apple Computer rose 3/8 to 30-5/8.

Sun Microsystems fell 4-3/4 to 42-1/4.

The two companies reportedly are still talking about Sun’s acquiring Apple, but neither had any comment.

Quarterdeck rose 1-5/8 to 17.

After-tax income in the first fiscal quarter, before one-time charges, was 14 cents per share, up from 7 cents a year ago.

After one-time charges of $2.5 million, primarily related to the acquisition of Inset Systems, Inc., the company reported net income of $2.1 million, or 7 cents per share. But the company said accounts receivables more than doubled to $28.29 million from $12.6 million.