Stocks Climb to Records as Bond Yields Edge Lower

Stocks chalked up more record closes Wednesday and bond yields were mostly down after a series of reports indicated the U.S. economy is robust but still not inflationary.

The dollar rose against major currencies. Oil closed slightly lower, but selling slowed as traders weighed the chances of world producers cutting back supplies.

The Dow Jones industrial average ended up 68.51 points at 8,868.32, building on a gain of more than 11% in the first quarter, which ended Tuesday.

“Now that there’s even more evidence that the economy is strong but inflation is down for the count . . . there is every reason for ebullience,” said Joseph Battipaglia, market strategist at Gruntal & Co.

Advancing issues outnumbered decliners by a 7-to-5 margin on the New York Stock Exchange in heavy trading.

The technology-rich Nasdaq composite index rose 11.98 points to 1,847.66, posting its second record-high closing in a row. The Russell 2,000, an index of small-company stocks, finished up 4.25 points at 484.93, also its second consecutive record.

Also at new highs, the Standard & Poor’s 500-stock list rose 6.40 points to close at 1,108.15 and the NYSE composite index rose 3.63 points to 576.41.

“It’s the first day of the quarter, and there is money being pumped into this market,” said Peter Coolidge, managing director of equity trading at Brean Murray & Co. “The interest-rate worry is also out of the way after the Fed held rates steady.”

The good news on the economy came from the National Assn. of Purchasing Management’s monthly index, which rose to 54.8 in March from 53.3 in February. The closely watched report showed the industrial sector continued to power forward last month, with little apparent drag from weakened Asian economies and prices well under control.

In other positive reports, the Commerce Department said spending on new construction hit a record in February and the Conference Board issued its February Index of Leading Indicators, which advanced 0.4% after a 0.1% gain in January.

Meanwhile, U.S. bond prices had the biggest gain in nearly three weeks as a rising dollar and slowing car sales encouraged investors even after a manufacturing report showed surprising strength.

A rise in the dollar against the Japanese yen increased the allure of dollar-denominated investments. Chrysler, the nation’s third-largest auto maker, said vehicle sales fell 2% in March, which suggested economic growth might be slowing.

“The economy is extremely strong,” said Lawrence Pavelec, who helps manage about $3 billion in bonds for M&I; Investment Management Corp. in Milwaukee. Still, “the story is inflation,” which shows no signs of accelerating, he said.

The yield on the bellwether 30-year U.S. Treasury bond fell to 5.88% from 5.93%.

Among Wednesday’s highlights:

* Some of the world’s largest companies--and best market performers--rose. Coca-Cola was up $3.19 at $80.63, leading gains in the Dow industrials, after the chairman of the world’s No.1 beverage company said it would boost investment in Asia.

Procter & Gamble gained $3.19 to $87.56 after it said it paid $375 million in cash to buy out Empresas CMPC, its partner in a Chilean diaper venture.

Chevron rose $2.19 to $82.50. Crude oil prices steadied after two days of losses, as exporters renewed their attempts to boost prices by cutting output.

* Investors looked to be rotating out of stocks that had already had a run-up and into names that have become a little cheaper, Battipaglia said. He gave as an example oil stocks, which have been beaten down by historically low prices, and were suddenly fashionable. British Petroleum rose 94 cents to $87, Mobil rose $1.81 to $78.44 and Royal Dutch was up $1.94 to $58.75.

* The economic slowdown in Asia appeared to have claimed more casualties. UAL said revenue for its first quarter and full-year 1998 may fall below expectations because of reduced business in Asia. UAL tumbled $2.69 to $90.25.

* CompUSA plunged $5.13 to $21, losing a fifth of its value, after warning that earnings would be disappointing on lower personal computer sales at its stores.

* Internet search directory Lycos gained $6.88 to an all-time high of $51.13 after it said it received contracts worth $30 million over several years, more than all the revenue it had last year.

Lycos makes its money by providing advertising space on its Web site and by licensing its search technology to other companies. The agreements reached with CDnow, Preview Travel and others show that the company’s able to command hefty advertising fees that will help increase its revenue, analysts said.

* In currency trading, the dollar rose to 133.68 Japanese yen in late New York trading from 133.15 yen Tuesday.

Overseas, Tokyo’s 225-share Nikkei stock index reflected the pessimism regarding the island nation’s economy, falling 1.73%.

Market Roundup, D8