Blue Chips Roll to 3rd Straight Record High

Blue chips drove the stock market to its third straight record high Thursday after Federal Reserve Chairman Alan Greenspan predicted the Asian crisis will have limited impact on the U.S.

The Dow Jones industrial average overcame early profit-taking for the second day in a row, erasing a 76-point deficit before closing up 55.05 points, or 0.66%, at 8,369.60. The market had fallen early, following a shaky day in Southeast Asia that jostled confidence in that region’s fragile recovery.

The Dow has now gained nearly 670 points, or 8.7%, in less than three weeks. For the year, the Dow is up 5.8% despite a 4% slide in the opening weeks.

U.S. bond yields, meanwhile, rose after Greenspan’s comments and lackluster demand for $10 billion of new 30-year Treasury bonds sold Thursday. The yield on the benchmark 30-year Treasury bond rose to 5.87% from 5.84%.

By midday, the stock market seemed headed for its first sizable setback in weeks. But with plenty of money caught on the sidelines during the recent rally, bargain-hunters were buoyed by Greenspan’s words and quickly moved in.

“There’s a lot of fear out there on the part of portfolio managers who do have some cash,” said Bill Meehan, chief market analyst at Cantor Fitzgerald in New York. “Whenever you have a rally, it tends to snowball as portfolio managers grow afraid of missing their benchmarks.”

The Standard & Poor’s 500 index and the New York Stock Exchange composite index both closed at new highs for the seventh time in nine sessions. But the turnaround was largely a blue-chip affair, with declining issues outnumbering advancers on the broad market, and smaller-company barometers barely posting gains. The Nasdaq composite index rose 5.79 points, or 0.34%, to 1,714.34.

“We would like to see [the rally] broaden out here to have a sense that this is a meaningful up-leg for the market, not necessarily just the ‘Nifty-50’ [big companies],” said Charles White, portfolio manager at Avatar Associates. Still, he added, “it’s hard to make a real bearish case,” excluding external factors such as Iraq, “which can be introduced at any time.”

Underscoring the recent change in sentiment, the sudden disruption in the rebound of Asian financial markets--an occurrence that might have sent Wall Street into a tailspin a few weeks ago--produced only modest profit-taking.

“There are probably other shoes to drop [in the Asian economic crisis], but people are not as horrified about the impact it will have on the U.S. market,” White said.

Greenspan told the Senate Foreign Relations Committee that Asia’s impact on the U.S. economy should be limited, though it could get worse if Congress doesn’t approve additional money for the International Monetary Fund.

Most Asian markets fell Thursday following a 9% plunge by the main stock index in Indonesia, where currency problems continued to erode share prices and protesters in one town rioted against high food prices.

Malaysia’s main index, which has risen 30% since the end of January, fell 5.7%. South Korean markets also were unsettled by a threat by labor unions to hold a nationwide strike this weekend. The benchmark stock index there fell 1.5%. Japanese shares held firm, however, with the Nikkei stock average falling just 0.2%.

In Europe, Frankfurt’s DAX index fell 1.1% and London’s FTSE 100 fell 1%.

Among Thursday’s highlights:

* Wal-Mart Stores rose $1.75 to $44.69 and Sears Roebuck rose $1.25 to $53.88 as two of the strongest components in the Dow. Retail stocks helped lead Thursday’s rebound, bolstered by a government report showing overall retail sales rose a disappointing 0.1% in January, but that department store sales rose 1.6%, the biggest gain in 13 months.

* Morgan Stanley, Dean Witter, Discover gained $2.50 to $63.94 on news it will buy back as much as $3 billion in stock from investors.

* Informix jumped $1.47 to $8.84 and was the most active stock in U.S. trading, after the database software maker reported an unexpected profit in its fourth quarter. The company said it held down costs and benefited from higher sales.

Market Roundup, D6