STOCKS : Dow Up 35 on Hopes of Lower Interest Rates

Stocks rose to their highest level in more than a week Friday, boosted by hopes that the Federal Reserve will soon lower interest rates to stimulate the economy.

The Dow Jones industrial index closed up 35.89 points at 2,490.84, 1.46% higher than Thursday’s close and up 54.70 points for the week. In the broader market, advancing issues outnumbered declines by about 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 1,091 up, 466 down and 439 unchanged.

Volume on the Big Board came to 168.70 million shares, up from 159.27 million Thursday.

Stocks of banks, insurers, utilities and drug and energy companies were particularly popular buys.

Two key government economic reports were the focus of much attention.

The October employment report, which showed the jobless rate steady at 5.7% but reported the sharpest underlying loss of private-sector jobs in seven years, confirmed that the economy was in danger of falling into recession.

Meanwhile, the Commerce Department said that the Index of Leading Economic Indicators, the government’s main tool for forecasting economic activity six to nine months ahead, pointed to future weakness for the second month in a row.

“The economy appears to have entered into recession in the past two months,” Lawrence Chimerine, president of Radnor Consulting Services, told a congressional committee Friday.

The belief that a recession is imminent or under way triggered hopes in financial markets that the Fed, the nation’s central bank, will cut interest rates again.

When an economy weakens, lower interest rates are one way to stimulate growth. They make it cheaper to borrow money.

One trader said some of Friday’s buying, particularly among the depressed financial service stocks, was bargain-hunting.

“We saw some institutional buying. People were afraid to miss out (on the rally),” he said.

Lack of news from the Persian Gulf and a sharp drop in oil prices also allowed investors to concentrate on domestic economic matters.

Crude oil for December delivery closed down $1.17 at $34 a barrel on the New York Mercantile Exchange.

Market highlights:

* Among the stronger banking stocks, J.P. Morgan rose 1 to 39, Citicorp gained 3/4 to 12 5/8, BankAmerica rose 1 to 20 3/8, Wells Fargo added 2 1/8 to 45 3/8 and Bankers Trust rose 2 1/8 to 34 1/8.

* Actively traded insurers included Marsh & McClennan, up 3 3/8 to 71 1/2; CNA Financial Corp., up 3 1/8 to 54 7/8; Chubb Corp., up 2 7/8 to 44 1/4, and Continental Corp., up 1 3/4 to 19 1/8.

* Federal National Mortgage rose 7/8 to 29 1/4, Sallie Mae gained 1 1/4 to 36 7/8 and Federal Home Loan rose 1 5/8 to 36 1/4.

* In energy stocks, Dresser Industries gained 1 1/4 to 18 1/4, Texaco Inc. rose 3/4 to 60 7/8 and USX Corp. added 7/8 to 32 1/2.

* Among actively traded blue chips, Philip Morris rose 5/8 to 48 1/2, Texaco added 3/4 to 60 7/8, International Business Machines edged up 1 1/8 to 108 3/8 and General Electric added 5/8 to 53.

Stock prices sank further on the Tokyo Stock Exchange. The 225-share Nikkei index closed at 24,194.99 points, down 100.17 from Thursday’s close.

On London’s Stock Exchange, share prices finished mixed in dull trading, as investors stuck to the sidelines. The Financial Times 100-share index closed up 2.7 points at 2,030.7.

In Frankfurt, shares dropped just before the close to end narrowly mixed. The 30-share DAX index ended down 2.94 points at 1,414.32.

CREDIT: Bond Prices Slip During Zigzag Day Bond prices fell slightly in volatile trading as conflicting economic forces turned the market into a buy-sell roller coaster.

The Treasury’s bellwether 30-year bond fell 5/32 point, or about $1.56 per $1,000 in face amount. Its yield, which rises when prices fall, advanced to 8.70% from 8.68% late Thursday.

The small price change “camouflages some fairly active trading and large volatility today,” said Scott Winningham, market analyst at Stone & McCarthy Research Associates.

Bond traders said things got off to a turbulent start with a flurry of speculative buying just before release of the employment report early in the day.

Analysts said the report met the market’s expectations, and traders began to sell off their holdings to cash in on the earlier gains.

Bond prices usually rise on negative economic news. When the economy is on a downturn, the Federal Reserve is considered more likely to nudge interest rates lower.

Bonds did get some support from the decline in oil prices.

The federal funds rate, the interest on overnight loans between banks, traded at 7.875%, down from 7.938% late Thursday.

CURRENCY: Economic Reports Deflate the Dollar The series of negative economic reports sent the dollar falling on speculation that the Federal Reserve will push interest rates lower.

Foreign exchange markets sold the dollar following release of the reports, believing that the data would put more pressure on the Fed to nudge interest rates lower as a means of stimulating the economy.

Lower U.S. interest rates are bad news for the dollar, which, like all currencies, is supported by higher rates.

Jack Barbanel, a market analyst with First Global Asset Management Inc., said the dollar was further hurt by Germany’s decision Thursday to raise a key interest rate, the Lombard rate. The increase gave more support to the German mark.

The dollar fell to 1.4945 marks in New York Friday from 1.5035 late Thursday. In earlier European trading, the dollar fell to 1.5020 German marks from 1.5070.

The dollar fell in New York to 127.78 Japanese yen, down from 130.555.

The British pound closed at $1.9590 from Thursday’s $1.9450.

COMMODITIES: Platinum Futures Drop $15 an Ounce Precious-metals futures prices fell sharply, led by a drop of more than $15 an ounce in the price of platinum amid heavy Japanese selling.

On other commodity markets, oil prices tumbled, livestock and meat futures were mixed and grains and soybeans were mixed.

Platinum futures settled $15.10 to $15.90 lower on the New York Mercantile Exchange, with the spot price at $416.60 and the actively traded contract for January delivery at $420.60 an ounce.

Gold finished $5.10 to $5.50 lower on New York’s Commodity Exchange, with December at $377.80 an ounce. Silver was 7.1 cents to 7.8 cents lower, with December at $4.185 an ounce.

The selloff wiped out most of the gains registered in precious metals earlier in the week.

Analysts said lower Japanese stock prices and weak U.S. economic data prompted heavy selling of platinum--on perceptions that industrial demand for the metal will decline as economic conditions worsen.