FINANCIAL MARKETS : Bond Rally Pushes Dow Up 55.64 to 53rd High of Year

U.S. stocks rose to record highs as investors spurned technology issues and bought shares of companies that make consumer products.

Concern that market-titan semiconductor companies won’t be able to live up to Wall Street’s expectations sparked a rally in companies with reliable earnings and household-name products.

“Business is slowing, and it’s spreading to many different industries,” said Seth Glickenhaus, president of Glickenhaus & Co., which manages $3 billion. “People want to buy the cream-of-the-crop stocks, the classy companies like Coke and Merck.”

Gains in Walt Disney Co., Philip Morris Cos., United Technologies Corp. and Exxon Corp. pushed the Dow Jones Industrial Average up 55.64 to 4852.67, its 53rd high this year. That surpassed the previous high of 4825.57 set Friday and triggered the New York Stock Exchange “downtick” rule, which limits stock-arbitrage trading, two minutes before the close.

A rally in bonds, reflecting investors’ optimism for a balanced budget, contributed to stocks’ advance. The yield on the benchmark 30-year bond fell 6 basis points to 6.25%, almost as low as late last week, when yields fell to the lowest since January, 1994.

Yields fell as even though Congress and the Clinton Administration have reached an impasse. Investors believe that a resolution would give the Federal Reserve room to lower interest rates again, spurring economic growth and stronger earnings growth next year.

New highs also were set by the NYSE’s composite index and the Standard & Poor’s 500-stock index.

“The bond market’s flying, and it just spilled into stocks,” said David Shulman, Salomon Brothers’ market strategist.

In addition to the Dow record, the Standard & Poors 500-stock index climbed 5.39 to 591.71, topping its Oct. 19 record of 590.60.

The technology-heavy Nasdaq composite index rose 4.04 to 1,047.94, falling short of its Sept. 11 record of 1,066.56.

The dollar shrugged off a tumbling Mexican peso Wednesday and rallied against the mark, buoyed by the German currency’s decline against other European currencies. The dollar also erased much of its overnight losses against the Japanese yen, although it still ended lower compared to its close Tuesday.

“It was a very strange day,” said Mike Malpede, senior foreign exchange analyst at Refco Group, Ltd. “Earlier peso crises have sent the dollar reeling.”

The dollar rose late Wednesday to 1.4207 marks from 1.4163 marks at the close Tuesday. The dollar slid to 102.55 yen from 103.02 yen at Tuesday’s close.

“Mexico’s problems are seen as isolated and no longer a North American problem,” said Chris Iggo, international economist at Chase Manhattan Bank. “The peso’s decline is also not a surprise. People have seen it brewing for weeks.”

All markets seem to be optimistic that October wholesale price and retail sales data, due out Thursday and next Tuesday, respectively, will show sufficient restraint in inflation and economic weakness to justify an easing by the Federal Reserve. Soft producer-price and retail sales figures have sparked strong bond rallies in recent months.

Negotiations in Washington on raising the nation’s $4.9-trillion debt ceiling concerned some investors but overall, “while the lawmakers are seeing doom and gloom out there and a possible default, it’s obvious that Wall Street is not looking at it that way,” said Anthony O’Brien, a market analyst at A.G. Edwards & Sons in St. Louis.

Among market highlights:

* Technology stock traders were cautious ahead of the Semiconductor Industry Assn.’s book-to-bill ratio, which was released after trading ended Wednesday. The industry report said the book-to-bill ratio rose to 1.18 in October--much higher than analysts expected--from 1.15 in September. The book-to-bill ratio means that manufacturers received $118 in orders for each $100 of chips delivered.

Before the announcement, Intel fell 7/16 to 65 15/16. Cirrus Logic’s shares added 5/8 to 28 5/8, recovering part of Tuesday’s 12 3/4 point loss. Applied Materials fell 1 to 47 3/4. On the Big Board, Micron Technology rose 1 to 62. IBM lost 3/4 to 97 3/4.

* Exxon, which rose 2 to 76 5/8, led oil stocks higher after the United Nations said that Iraq continues to reject a U.N. plan to allow more oil sales.

* Banking stocks got a boost from the prospect of lower interest rates. Bank of Boston shares rose 1 7/8 to 46, Nationsbank added 1 to 67 7/8, and Bank of New York climbed 7/8 to 42 3/4.

* Several new stock offerings attracted keen interest, with Sandisk, a designer of data storage products, gaining 6 3/4 to 16 3/4. Meta-Software jumped 6 7/8 to 18 7/8 and Corestaff soared 6 7/8 to 23 7/8.