Stocks Rally; Nasdaq, S&P; Hit Records

Stocks rose for a fourth day in a rally, paced by computer and airline companies. The Dow Jones industrial average ended short of its record, but both the Standard & Poor’s 500 and Nasdaq composite indexes reached records.

The Dow 30 jumped 64.46 points, or 1.17%, to end at 5,582.60, adding to Friday’s rally of 43 points.

Monday’s surge was an unusual display of confidence ahead of today’s report on the consumer price index for April.

“There’s lots of good earnings news on the horizon,” said Robert Froelich, chief investment strategist at Van Kampen American Capital, which has about $40 billion under management.

Shares of Microsoft and Intel led the advance amid optimism that a new software program and an improved computer chip will spark strong sales for the industry leaders in coming months. Intel was up 2 5/8 to 71 3/4; Microsoft hit a record, 118 5/8, up 3 3/4.

Computer-oriented stocks will do well in coming months because “companies are getting leaner, and they’re doing it with technology,” said Leslie Ferris, portfolio manager at the Ivy Growth Fund.

In the broader market, advancing issues overwhelmed decliners 1,681 to 691 on active trading of 394 million shares on the New York Stock Exchange. The Nasdaq composite index was up 19.11 points, or 1.59%, at 1,221.87, and the S&P; 500 jumped 9.42 points to 661.51, edging above the old high of 661.45 set Feb. 12. The Dow peaked on April 3 at 5,689.74.

The market’s about-face caused some to shake their heads.

“It’s absolutely incredible. Some of the prices and valuations of new companies are astounding. I haven’t seen anything like this since the summer of 1968,” said Ricky Harrington, technical analyst at Interstate/Johnson Lane. “The only thing you can say is there’s enough money coming in to drive indexes to new highs. Money is coming in to all sectors. The bull market lives.”

Stocks were helped again by the return of stability to the bond market, where the yield on the 30-year Treasury bond--a benchmark used to set the interest rates on many types of loans--dropped below 6.9% during trading. It finished at 6.90% on Monday, down from 6.92% on Friday. The long bond’s rate has surpassed 7% twice in the last two weeks, making bonds an enticing investment but also carrying the threat of higher corporate borrowing costs and slower consumer spending.

The stock-buying frenzy started Friday on news that wholesale prices, as reflected in the producer price index, had posted a smaller-than-expected rise of 0.4% in April and were up just 0.1% when food and energy were left out.

Economists surveyed by Reuters expect the consumer price index for April to reinforce the benign inflation outlook reflected in the wholesale figures.

The index for March was up 0.4%, with a rise of 0.3% in core components.

Among Monday’s highlights:

* Included in the rising technology stocks were Motorola, up 2 1/2 to 63; Hewlett-Packard, up 4 1/8 to 112 3/8; and Netscape, up 3 3/4 to 64. HP and Netscape said they will announce a strategic alliance today.

* The stock of discount air carrier ValuJet fell in heavy trading. A ValuJet DC-9 crashed in the Florida Everglades on Saturday, killing all 109 people aboard. Its stock finished down 4 3/16, or nearly 25%, at 13 11/16, and it topped the Nasdaq most-active list.

* HBO, which provides computers and information-processing software and services to hospitals, saw its stock surge 10 1/2 to 130 1/2 after brokerage house Cowen & Co. reiterated its “strong buy” rating on the firm and Alex. Brown raised its earnings estimates. HBO on Friday announced plans to buy CyCare Systems. CyCare shares rose 1/2 to 48 1/8.

* China’s Guangshen railway rose 1 1/4 to 20 1/4 in its Wall Street debut. Its 11.4-million American depositary share initial public offering was priced at $19 a share.

* HealthSource slumped 7 3/4 to 24 1/8 after it posted disappointing earnings.

Market Roundup, D8