Bond Rally Fuels Dow’s Surge To Record High

The stock market rode a strong bond rally to reach record highs Wednesday, even after a rebound in semiconductor stocks fizzled.

The Dow Jones industrial average surged up 55.64 to close at 4,852.67, reversing two days of losses and surpassing the previous high of 4,825.57 that was reached Friday. The Dow was up enough in the last few minutes of the session to trigger restrictions on program trading by the New York Stock Exchange.

“The bond market’s flying, and it just spilled into stocks,” said David Shulman, Salomon Brothers’ market strategist.

Advancing issues led decliners by about 3 to 2 on the NYSE, where volume was moderately heavy at 359.77 million shares as of 4 p.m., down from 362.9 million on Tuesday.

The 30-year Treasury bond was up nearly a full point, or $10 for each $1,000 in face value, late in the session, yielding 6.25 percent, as investors displayed growing confidence that the Federal Reserve would soon lower interest rates.

The confidence was based on optimism that October wholesale price and retail sales data will show sufficient restraint in inflation and economic weakness to justify an easing by the Federal Reserve.

Some of the stocks that moved substantially Wednesday:

NYSE

Federated Department Stores rose 1-1/4 to 28-1/4.

The retailer reported a loss of $46.4 million, or 24 cents per share, in the third quarter, citing one-time costs of absorbing new stores and consolidating divisions. Without those costs, Federated said it would have had third-quarter profits of $45.2 million, or 25 cents a share.

Chrysler fell 1-3/8 to 48-7/8.

Ford fell 3/8 to 28-3/8.

General Motors fell 3/4 to 44-7/8.

Chrysler said it was comfortable with analysts’ recent lowering of their earnings projections for the company.

NASDAQ

Cirrus Logic rose 5/8 to 28-5/8.

The chip maker’s stock dropped 12 on Tuesday, after the company said one of its major customers is reducing orders for certain chips.

America Online fell 3-3/4 to 78-1/4.

The computer online service company late Tuesday said it lost $10.3 million in the July-September quarter after taking a special charge related to its acquisition of Ubique Inc.

AMEX

Alert Centre rose 4-5/16 to 9-1/16.

ADT Ltd. signed a definitive agreement to acquire Alert Centre. Alert Centre, a Denver-based company that provides residential security and monitoring services, has recommended that its stockholders accept the offer.