Dow Soars to Record 9,736

The Dow Jones industrial average soared to a record high Friday after an unemployment report depicting the near-perfect combination of economic growth and barely detectable inflation reduced fears that interest rates will continue to climb.

The blue-chip index rocketed 268.68 points, or 2.8%, to 9,736.08 as long-term bond yields slid from seven-month highs.

The Dow’s close eclipsed the previous record of 9,643.32 set on Jan. 8.

Stocks that thrive on surging consumer spending, such as retailers, auto makers and financial-services companies, led the advance.

But the Dow scored the biggest percentage advance of any major stock index, and was the only index to hit a new high--another sign, analysts said, that many investors are interested only in the biggest, safest stocks.

The Standard and Poor’s 500 index rose 28.83 points, or 2.3%, to 1,275.47, leaving it less than 1% from its Jan. 29 record close. The Nasdaq composite index, which had fallen nearly 10% recently due to weakness in leading high-technology names, advanced 44.22 points, or 1.9%, to 2,337.11.

Stock and bond markets rallied after the February jobs report showed wages rising a scant 0.1% in the month. That reinforced other data indicating that inflation remains in check, and drove the yield on the benchmark 30-year Treasury bond down to 5.60% from Thursday’s seven-month high of 5.69%.

“We’ve seen [the wage figure] and it wasn’t that bad,” said Peter Canelo, investment strategist at Morgan Stanley Dean Witter in New York. “I think the market is going to fly. We could see 10,000 [on the Dow] within the next month or two.”

The jobs report, which also showed the nation adding 275,000 new jobs in February, stoked optimism that skyrocketing consumer spending will continue to pad corporate profits, while at the same time inflation will stay subdued--potentially putting a cap on interest rates.

Consumer spending normally comprises about 65% of the country’s gross domestic product. But Americans are so willing to open their wallets these days that it could account for a whopping 90% of first-quarter GDP, said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis.

Expectations of more free-flowing spending were reflected in strong gains Friday in the Dow’s consumer-oriented stocks. American Express climbed $5.63 to $118.63, General Motors rose $2.88 to $88.63 and McDonald’s catapulted $4.19 to $94.31.

“The bottom line is the economy continues to grow nicely without inflationary forces, and the consensus is now the [Federal Reserve] will take no action” to tighten credit, said Scott Bleier, chief investment strategist at Prime Charter Ltd., a New York investment bank.

Nevertheless, some experts warn that the market’s outlook is far cloudier than Friday’s gains would make it appear.

As evidence of a galloping economy continues to mount, bond yields are certain to push higher, some contend. Even Friday’s bond rally ran out of steam: The 30-year bond yield finished up from its low of 5.55% at midday.

“Initially, the market simply has looked at the good news and not the bad news,” Sohn said.

Many Wall Streeters believe the stock market’s foundation is shaky because it rests more than ever on big-name stocks. In fact, indicators that measure the performance of all stocks on the New York Stock Exchange and Nasdaq Stock Market are at or near the lows they reached at the bottom of last fall’s dramatic market downturn.

“It’s the thinnest rally in a couple of years,” said Christine Callies, chief strategist at Credit Suisse First Boston Corp.

So-called breadth improved Friday, but was far from overwhelming given the gains in the major averages. Advancing stocks outnumbered decliners by 21 to 9 on the NYSE, but led by only 11 to 9 on Nasdaq.

Volume on the New York Stock Exchange was 835 million shares, a pickup from its recent moderate levels, but far below several peak days in January when volume topped 1 billion shares a day. That shows investors were not rushing into stocks on Friday.

The broad-market weakness is reflected in the continued lackluster performance of stock mutual funds this year. The average fund was down 2.1% year-to-date through Thursday. With Friday’s rally, the average fund may now be about even--while the Dow is up 6% and the Nasdaq index is up 6.6%.

Still, stocks worldwide turned hot on Friday. In Japan, the Nikkei-225 index surged 5% to 14,894, its best showing since Oct. 7, on optimism that the country’s economy is bottoming.

Hong Kong shares jumped 3.3%, while stocks rose 3.4% in Germany, 2.5% in France and 3.5% in Italy.

If the Dow is indeed able to hurdle the magical 10,000 mark, it would do so in part because it includes several financial and consumer stocks that are roaring, while being fairly light in technology issues.

Critics have blasted the Dow for having only two pure tech stocks--IBM and Hewlett-Packard. They say the composition of the index underplays the increasing role of technology in business.

But that could be a blessing for the Dow in the short-term. Despite Friday’s solid performance, tech stocks have been under pressure recently, and some analysts expect that to continue.

On a positive note, most major stock indexes finished near their highs for the session, indicating that buying remained robust through the day and boding well for the open on Monday.

Among Friday’s highlights:

* Among tech stocks, Microsoft gained $2.69 to $154.94, Applied Materials climbed $4.13 to $61.69 and Cisco Systems tacked on $2.56 to $100.81.

* Level One Communications soared $17.88 to $45 on news late Thursday that it will be acquired by Intel in a $2.2-billion stock swap that valued Level One at $48.75 a share.

* In the retailing group, Circuit City was up $5.50 to $68.75, Dayton Hudson picked up $3.13 to $69, Costco improved $3.81 to $90.56, Home Depot increased $1.63 to $62.25 and Wal-Mart jumped $3.88 to $93.25.

* Strong financial stocks included BankAmerica, up $2.63 to $68.88; Charles Schwab, up $3.06 to $81; and AIG, up $2.88 to $118.31.

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Blue Chips Zoom; Will Market Follow?

The Dow Jones industrial average soared to a record high on Friday on the heels of encouraging economic data. But the Dow was alone at the top, as most major stock ndexes remain below their peaks. Weekly closes on the Dow:

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THE OTHER INDEXES

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Pctg. Friday from Index close peak S&P; 500 1,275.47 -0.3% NYSE composite 603.14 -1.3 Dow utilitiesc 301.51 -5.9 Nasdaq composite 2,337.11 -6.9 S&P; mid-cap 364.96 -7.6 Dow transports 3,312.79 -10.1 Russell 2,000 398.01 -19.0

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Friday: 9,736.08, up 268.68

Sources: Bridge, Reuters

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Market Roundup, C4