Blue Chips Up Slightly; Dollar Tumbles Again

Blue-chip stocks ended slightly higher Wednesday after soaring with bond prices on news that inflation remained under control.

The dollar tumbled to its lowest level against the yen in nearly four months on rumors that the U.S. Treasury would support a stronger Japanese currency.

The Dow Jones industrial average rose by as much as 77 points in the first hour of trading, but finished with a gain of just 11.95 at 7,286.16, about 7 points shy of Monday’s record high. It was the second straight day that the Dow broke past 7,300 only to retreat below that mark by the close.

Broad-market measures also faltered after an early jump with the bond market, although the New York Stock Exchange composite index managed to hold just enough of a gain to close at a new high.

Blue chips romped ahead from the start, with the Dow surging more than 75 points on news that the April producer price index--a key gauge of inflation--posted its biggest drop in nearly four years, falling 0.6%.

Much of the enthusiasm behind the market’s speedy recovery has hinged on expectations that the Federal Reserve Board will not boost short-term interest rates again in its crusade against inflation.

“It’s kind of do or die now. We just made record highs, and there’s no way of knowing exactly what’s on the Fed’s mind,” said Rick Jandrain, chief investment officer for equity securities at Banc One Investment Advisors in Columbus, Ohio.

Bonds rallied on the inflation news. As prices rose, the yield on the 30-year Treasury bond fell from Tuesday’s 6.92%, slipping as low as 6.85% in the morning before settling at 6.88%.

Advancing issues outnumbered decliners by nearly a 3-2 margin on the NYSE, in moderate trading. The Standard & Poor’s 500-stock list rose 2.91 points to 836.04, about 1 1/2 points below Monday’s record. The NYSE composite rose 1.63 points to 435.60, barely topping Monday’s all-time high of 435.57.

The Nasdaq composite index rose 1.96 points to 1,335.55 as technology issues struggled despite an encouraging earnings report from a leading manufacturer of chip-making equipment

Among Wednesday’s highlights:

* The Dow’s biggest gainers were J.P. Morgan, up 2 1/2 to 104 1/2, and DuPont, up 2 1/8 to 110 1/4. The weakest Dow issue was Procter & Gamble, down 2 1/8 to 130 3/8.

* Financial issues were buoyed by the rally in bonds. Following J.P. Morgan’s lead were Wells Fargo, up 5 5/8 to 285 1/8; BankAmerica, up 4 to 120 7/8; NationsBank, up 1 1/4 to 61 3/4; and Citicorp, up 2 1/2 to 120 5/8.

* Nasdaq was helped by an encouraging earnings report from Applied Materials, up 3 27/64 to 63 55/64. But a weak forecast caused Micron Electronics to drop 2 3/16 to 16 7/16.

Intel, meanwhile, started the day with another steep slide amid news of lawsuits alleging patent infringement. But the stock, which in the morning nearly duplicated Tuesday’s 6 3/4-point loss, rebounded to close up 1/2 to 152 7/8.

An initial offering by Rambus, which makes technology for speeding up computer chips, soared 18 1/4 to 30 1/4.

Software maker Baan fell 4 7/8 to 55 5/8 after its rating was cut. On Tuesday, it agreed to buy Aurum Software for $250 million. Aurum rose 1 7/8 to 19.

* Northern States Power jumped 1 3/4 to 48 after the Federal Energy Regulatory Commission rejected its plan to merge with Wisconsin Energy, which fell 1/2 to 24 1/4.

In currency trading, the dollar sank briefly to 116.95 yen, a level not seen since mid-January.

In late New York trading, the dollar settled at 117.23 yen, down from 118.67 on Tuesday. The dollar fetched 1.6947 German marks, up slightly from 1.6940.

Overseas, London’s FTSE-100 index closed 4.1 points lower at 4,686.9. In Tokyo, the Nikkei-225 closed up 80.61 points, or 0.40%, at 20,209.72.