Dow Surges As Investors Bet On Lower Rates

Stocks followed bonds sharply higher on Friday, as investors sifted through several economic reports and decided that there is a chance the Federal Reserve will lower interest rates in the near future.

The Dow Jones industrial average gained 36.98 points to close at 4,647.54, reversing two days of modest losses.

Long-term bonds closed up nearly 1/2 point in a shortened pre-holiday trading session. The U.S. financial markets are closed on Monday for Labor Day.

“There is a growing confidence that the economy is holding together and that the Fed has done a good job of keeping inflation down, and that they will continue to do so even if they need to cut interest rates again,” said Alfred Goldman, vice president at A.G. Edwards & Sons Inc. in St. Louis.

Advancing issues led decliners by about 11 to 7 on the New York Stock Exchange. Big Board volume was relatively light in pre-holiday trading, dipping to 255.72 million shares as of 4 p.m. from 300.9 million Thursday.

The market started the day slightly lower, after the Labor Department reported a surprising 0.1 point drop in the nation’s unemployment rate in August, to 5.6 percent.

But not all the day’s news signaled a burgeoning economy. In what traders called the most important report of the day, the National Association of Purchasing Management said its index of economic activity dropped to 46.9 percent in August from 50.5 percent in July.

Some of the stocks moving substantially or trading heavily Friday:

NYSE

Pfizer fell 1-3/8 to 48.

The National Heart, Lung and Blood Institute warned that the blood pressure and heart drug nifedipine, which Pfizer markets as Procardia, should be used “with great caution, if at all,” and said the safety of related drugs was unclear. A study showed that high dosages of the drug nearly tripled the death rate in patients who had already suffered heart attacks.

Brinker International fell 1-3/4 to 15.

Several investment firms downgraded the Dallas restaurant operator after the company told analysts that its yearly earnings would be flat, citing soft consumer spending and excess industry supply. A call to the company was not immediately returned.

Ford Motor rose 1/2 to 31-1/4.

Chrysler rose 3/4 to 54-1/2.

General Motors rose 1-1/4 to 48-3/8.

The stocks rose all day in anticipation of healthy car-sales data. After the market closed, Chrysler reported that its August car sales rose 2 percent, while General Motors’ were up 8.6 percent. Ford is scheduled to release its August sales figures next week.

NASDAQ

Microsoft fell 2-3/4 to 89-3/4.

Symantec rose 1-3/4 to 30-5/8.

Microsoft said buyers of its new Windows 95 program have found the floppy diskette version can be ruined by a virus on their machines. That helped shares of Symantec, which sells a Windows 95 anti-virus product.

CopyTele Inc. fell 7/8 to 8-3/4.

CNBC commentator Dan Dorfman said he was told the stock was worth $1 to $2 per share. The company makes flat panel displays.