Dow Leads Rally, Up 83; Rates Slip, Gold Dives

Blue chip stocks surged for a second day Thursday, with the Dow Jones industrial average gaining 83.12 points, or 1.2%, to 6,823.86 amid lower bond yields and fresh optimism about technology companies’ earnings.

In other markets, gold tumbled anew, while the dollar eased.

The Dow led a broad stock market rally, with winners topping losers by 15 to 9 on the New York Stock Exchange.

The Dow’s two-day rise of 168 points has recouped nearly two-thirds of its losses in the prior five sessions, when profit-taking slammed many high-flying blue chip shares.

Traders said the market drew strength Thursday from a modest bond rally. The 30-year Treasury bond yield, which recently hit a four-month high of 6.94% on worries about the economy’s strength, slipped to 6.87% from 6.90% Wednesday.

A private survey showed that shipments, new orders and production at U.S. factories fell in January. The APICS/Evans Economics Business Outlook index dropped to 45.9 from 51.8 in December. A reading below 50 suggests manufacturing is unchanged or declining.

“The economy is not robust and it’s not dying,” and that should be OK for bond investors, said Robert Alley, who manages $2.5 billion in bonds at AIM Advisors.

The government today will report on fourth-quarter economic growth, which will give bond traders more of a sense of how much momentum the economy had at the start of 1997.

Meanwhile, testifying on Capitol Hill on the subject of revising the consumer price index, Federal Reserve Board Chairman Alan Greenspan made no comment about the economy. The Fed board will meet Tuesday and Wednesday, and is widely expected to leave interest rates unchanged--betting that economic growth will remain moderate at best.

However, Greenspan’s assertion that the CPI overstates inflation may have helped push gold down again. The metal’s price has plunged recently as continued low inflation worldwide has caused more investors to give up on the need to own an inflation hedge.

February gold futures sank $5.60 to $346.20 an ounce on the Comex, a 3 1/3-year low.

Elsewhere, the dollar lost ground after Eisuke Sakakibara, a senior Japanese Ministry of Finance official, suggested Japan might move to halt the yen’s continuing slump. The dollar was off 0.29 yen in New York, to 121.79, and also slipped against the German mark.

Sakakibara said Japan’s central bank might “intervene” in the currency market if it judges that exchange rate swings will hurt the economy, Jiji Press reported.

Among Thursday’s highlights:

* Semiconductor shares surged, after Intel announced a smaller-than-expected cut in prices for its key computer chips--suggesting that robust demand continues, with positive implications for tech-sector earnings.

Intel jumped 5 3/8 to a record 160 1/8, Advanced Micro Devices leaped 2 1/4 to 35 1/8, Texas Instruments rocketed 4 3/4 to 74 1/2 and Micron Technology shot up 2 3/8 to 35 3/8.

* Among other tech shares, Microsoft jumped 3 7/8 to a record 101 1/8, Hewlett-Packard gained 2 1/8 to 53 1/2 and 3Com rebounded 2 3/4 to 65 1/2.

* Among Dow stocks, investors flocked back to GE, up 2 to 105 3/8; DuPont, up 2 3/4 to 110; and Procter & Gamble, up 4 9/64 to 115 3/8.

* Lower bond yields helped push bank stocks up sharply, led by Wells Fargo, up 6 1/2 to a record 303 1/2; Norwest, up 1 5/8 to 48; Citicorp, up 2 5/8 to 114 1/4; and BankAmerica, up 2 1/4 to 110 1/4.

* Among stocks reacting to earnings announcements, Centennial Technologies tumbled 7 to 27 1/4, Sherwin-Williams rose 1/2 to 55 7/8, B.F. Goodrich gained 2 1/4 to 40 3/8, Wm. Wrigley soared 3 to 58 3/4 and Aflac lost 1 1/4 to 40 1/8.

Market Roundup, D6