Bulls Run Right Over 6,800 Mark

The Dow Jones industrial average plowed above 6,800 for the first time Friday, extending January’s powerful rally, as the profit-enhancing potential of the economy’s surprising strength continued to outweigh inflation fears.

The Dow rose 67.73 to 6,833.10 for its fourth record-high close this week and eighth in two weeks. The blue-chip barometer rose 129.31 points on the week, bringing the new year’s gain to nearly 385 points, or 6 percent.

Broader measures also posted a sharp advance, boosting several to new highs.

Continued enthusiasm over this week’s opening trickle of fourth-quarter profit reports - and the notable dearth of discouraging earnings forecasts or announcements - helped offset some more potentially unsettling news on the economy and inflation.

Bonds slid again Friday morning, lifting interest rates, after the Federal Reserve reported that industrial production rose 0.8 percent in December.

That was slightly higher than many analysts had expected. It also was the latest in a stream of unexpectedly strong economic readings that have raised concerns over whether the inflationary pressures, such as rising production costs, will remain in check.

As bonds fell, the yield on the 30-year Treasury - a key determinant of corporate and consumer borrowing costs - rose as high as 6.85 percent from late Thursday’s 6.82 percent. But the Treasury market recovered most of the early drop, taking pressure off stocks, with the yield finishing almost unchanged at about 6.83 percent. Rising inflation makes fixed-income investments such as bonds less appealing.

Some of the session’s inflation jitters were calmed by other reports showing that consumer sentiment worsened in the first half of January and the U.S. trade deficit grew less than expected in December.

“Even though industrial production was stronger than consensus estimates, there were some offsetting statistics that neutralized that number,” said Russ Labrasca, senior vice president at Principal Financial Securities of Dallas. “We continue to see very finely balanced moderate growth, modest inflation, and still relatively low interest rates.”

Although much of the week’s strength was attributed to strong earnings reports from industry leaders, analysts also credited the big demand for stocks generated by new investment capital from year-end bonuses and retirement plan contributions, as well as the reversal of tax-related selling last year.

“I’m very fearful about what will happen when the new year reinvestment ends or slows perceptibly. I’ve seen it persist into February. But when it ends - and it will end - I’m concerned about the market,” said Ralph Bloch, chief market analyst at Raymond James & Associates in St. Petersburg, Fla.

Overseas, Tokyo’s Nikkei stock average fell 0.3 percent, Frankfurt’s DAX index rose 0.3 percent and London’s FT-SE 100 rose 0.2 percent.