Stocks Return To Record Territory

Stocks rallied Friday, setting new highs for the first time in nearly two months, as a surprisingly strong economic report eased worries about weak profits instead of spurring the usual attack of inflation jitters.

The Dow Jones industrial average rose 98.97 to 8,149.13, just 10 points shy of its all-time best close at 8,159.31 on Aug. 6.

But the highlight of the rally was the return to record levels by the Standard & Poor’s 500 stock index and the New York Stock Exchange composite index. The two broad-market measures closed at record highs for the first time since Oct. 7, a few weeks before Wall Street succumbed to a global selloff caused by an economic crisis in Asia.

For the week, the Dow gained 326 points, or more than 4 percent, giving it a 26 percent gain for 1997 with less than a month to go. The S&P 500 and the NYSE composite are both up more than 30 percent this year. Before the year began, few analysts predicted the market would post gains much better than 10 percent in 1997.

In a report that normally would have roiled the market, the Labor Department said the nation’s unemployment rate sank to a 24-year low of 4.6 percent in November as employers added 404,000 workers to their payrolls, nearly double what analysts had expected.

The report did, in fact, unnerve the inflation-sensitive bond market, but stock investors were heartened by the notion that an economy strong enough to create so many jobs might also be strong enough to bolster company profits, which are expected to be hurt by weakening demand for U.S. exports from Asia and other troubled markets.

“The report certainly suggests that the economy is strong, and investors, seeing that, rushed to buy economically sensitive stocks,” said A. Marshall Acuff Jr., equity strategist at Salomon Smith Barney, noting the gains among technology companies, automakers and oil producers. “Companies that were hit hard because of concerns about the Far East rebounded (Friday) because there’s a feeling that we’ve gotten more economic growth than expected.”

The strong showing by stocks overshadowed a setback in the recent improvement in interest rates in the bond market, which has benefited from the exodus from foreign stock markets.

As bond prices fell Friday, the yield on the 30-year Treasury - a key determinant of the interest charge on many types of loans - rose as high as 6.16 percent before settling at 6.09 percent. That compares with late Thursday’s 6.04 percent and late Wednesday’s 6.01 percent, which was the lowest finish since January 1996,

Advancing issues outnumbered decliners by a 3-to-2 margin on the New York Stock Exchange, with 1,731 up, 1,188 down and 521 unchanged. NYSE volume slowed from the hectic pace seen Wednesday and Thursday, but still totaled a brisk 556.95 million shares as of 4 p.m.

Overseas, Tokyo’s Nikkei stock average rose 0.7 percent, Frankfurt’s DAX index rose 0.7 percent and London’s FT-SE 100 rose 1.2 percent.