Stocks Climb On Hopes Of Interest Rate Cut

Interest-sensitive issues such as banks and utilities helped stocks rise Friday after two economic reports revived hopes for another rate cut by the Federal Reserve Board.

The Dow Jones industrial average rose 20.78 to 4,601.40.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange. Big Board volume totaled a light 255.65 million shares as of 4 p.m., down from 299.18 million on Thursday.

Low mortgage rates helped push up sales of existing single-family homes in July a surprising 5 percent, to the highest level in more than a year, the National Association of Realtors reported. Home sales usually stimulate the overall economy because they lead to other purchases.

The Federal Reserve Bank of Philadelphia said a survey of 52 forecasters showed the outlook for inflation over the next five quarters looks better than it did three months ago. The panel expects the consumer price index to rise 2.9 percent in the third quarter.

Taken together, the reports meant good news for bonds and stocks.

“There are some solid gains in the financial sector, particularly banks and insurance companies and this is obviously being helped to some extent by the improvement in the bond market, even though existing home sales were stronger than expected,” said Hugh Johnson, chief investment officer at First Albany Corp.

Some of the stocks that moved substantially or traded heavily Friday:

NYSE

Bear Stearns Cos., down 2 to 19-3/4.

Jeffrey Reich, a senior managing director, became the sixth senior executive to leave the financial firm since bonuses were handed out this month, The Wall Street Journal reported. All are now free to sell about 2.4 million shares of stock they have accumulated.

Motorola Inc. down 4-1/8 to 72-3/4.

AMEX

Gaylord Container Corp., up 1-5/16 to 11-13/16.

The Deerfield, Ill. maker of corrugated boxes and grocery bags could be bought out soon, reported Business Week.

NASDAQ

Semiconductor stocks were among the weakest in the technology sector, which declined for the second day in a row. Applied Materials Inc. fell 5-3/4 to 107-1/2.

Silver King Communications, up 17-1/8 to 39-3/8.

A company controlled by media entrepreneur Barry Diller will pay $22.62-1/2 per share for 20 percent of the St. Petersburg, Fla.-based owner of 12 television stations. The stations now carry mostly home shopping programs, but Diller, who created the Fox Network, is expected to introduce more diverse programming.

WorldCom Inc., up 1-1/2 to 33-1/8.

The former LDDS Communications is the nation’s fourth-largest long distance phone company. Business Week reported that buyout interest in the company is high.

CRA Managed Care Inc., down 3/8 to 20-1/8.

The company, which provides administrative services to managed health care providers of workers compensation benefits, went public in May. CS First Boston initiated coverage with a “strong buy” recommendation.