Wary Investors Keep Foot On Brake

Stocks barreled toward new highs Wednesday but ended only barely stronger as some pleasing inflation data failed to convince investors that the Federal Reserve won’t raise interest rates next week.

The Dow Jones industrial average rose by as much as 77 points in the first hour of trading, but finished with a gain of just 11.95 at 7,286.16, about 7 points shy of Monday’s record high. It was the second straight day that the Dow broke past 7,300 only to retreat below that mark by the close.

With the Federal Reserve’s next policy-making meeting less than a week away and the stock market suddenly trading near record levels again, it wasn’t surprising to see the rally fade so easily, analysts said.

Much of the enthusiasm behind the market’s speedy recovery has hinged on expectations the Fed won’t boost short-term interest rates again in its crusade against inflation.

“It’s kind of do or die now. We just made record highs, and there’s no way of knowing exactly what’s on the Fed’s mind,” said Rick Jandrain, chief investment officer for equity securities at Banc One Investment Advisors in Columbus, Ohio.

Advancing issues outnumbered decliners by nearly a 3-to-2 margin on the NYSE, where volume totaled 498.77 million shares as of 4 p.m., up from Tuesday’s pace.

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

NYSE

The Sports Authority, down 1-1/8 at 17-1/2.

The sporting goods retailer reported a 24 percent improvement in first-quarter profits, but cautioned that maintaining sales growth could be difficult.

Applied Magnetics, down 3 at 26-3/8.

The stock fell after Montgomery Securities raised concerns about the production yields of the company’s newest thin-film disk-drive heads, the Dow Jones News Service reported.

NASDAQ

Intel, up 1/2 at 152-7/8.

The computer chip giant was hit late Tuesday with another lawsuit alleging patent infringement. In separate lawsuits, Digital Equipment and Cyrix are seeking an unspecified amount of monetary damages, along with an injunction to stop Intel from making microprocessors using the disputed technology in its popular line of Pentium microprocessors.

Applied Materials, up 3-27/64 at 63-55/64.

The leading maker of semiconductor manufacturing equipment exceeded analyst profit forecasts for its second quarter ended April 27.

Baan Co. NV, down 4-7/8 at 55-5/8.

Aurum Software, up 1-7/8 at 19.

Baan agreed to buy Aurum for stock valued at $250 million, or $21 a share.