Late Rally Gives Dow Record Week

The Dow Jones industrial average jumped just shy of a record and the Nasdaq market scored its biggest point gain as stocks rallied Friday into the close of one of Wall Street’s best weeks ever.

The Dow rose 94.72 to 7,071.20, essentially erasing any remaining trace of its recent 700-point slide, as investors celebrated news of a federal budget deal and an improving inflation and interest rate outlook.

“After the monster gains of the last three weeks, the big test comes next week, when everyone has had the chance to digest the news,” said Larry Rice, chief investment officer at Josephthal, Lyon & Ross.

Broader measures also rose sharply again, with the biggest gains coming among smaller-company shares, which had lagged the blue-chip rebound before this week.

Perhaps most encouraging was how widespread the gains were. Until recently the recovery has been focused on the Dow industrial stocks. But this week’s rally pulled in the long-suffering Nasdaq Stock Market, which had been weighed down by big drops among technology stocks.

For the week, the Dow added 332.33 points - it’s biggest one-week tally - putting Wall Street’s best-known barometer less than 15 points below the March 11 record of 7,085.16.

Although the technology sector was sharply higher much of the day, the broad market didn’t rally until late in the session, when bonds rose on word that President Clinton and Republican congressional leaders had agreed on a plan to balance the budget while bestowing tax breaks on investment profits.

Friday morning’s data on April employment, the last of several major reports released this week, initially drew a mixed reaction, but investors latched onto indications that job creation remained modest while wages edged lower.

Economists have been worried that a strong job market will force companies to raise wages - and prices - as they compete for workers to meet demand.

In March, the Federal Reserve moved to keep a lid on inflationary market pressures by raising one of its key lending rates, spurring a steep downturn in the markets.

The central bank is widely expected to raise interest rates again later this month. But investors, concerned that rising interest rates will stifle consumer spending and company profits, have been hoping that economic trends will slow enough that the Fed can stop raising interest rates for now.

As bond prices rose on the day’s economic and political news, the yield on the 30-year Treasury bond fell to 6.88 percent, its lowest level since inflation worries began mounting in March. The long-bond yield - another key influence on borrowing costs - started the week at 7.13 percent.

Overseas, Tokyo’s Nikkei stock average rose 1.2 percent, Frankfurt’s DAX index rose 0.6 percent and London’s FT-SE 100 rose 0.2 percent.

Advancing issues outnumbered decliners by more than a 4-to-1 margin on the New York Stock Exchange.