Stocks and Bonds Gain on Price Data

Stock and bond prices rose in volatile trading Friday as a report pointing to tame inflation calmed investor worries about interest rates and helped erase some of Thursday’s big losses.

The Dow Jones industrial average rose 56.57 points to 6,935.46, recouping about a third of Thursday’s 160-point drop sparked by strong February retail sales data.

Most broader measures also repaired some of the previous session’s damage, but the Nasdaq composite index turned negative over the last hour as investors pulled more profits from the technology sector. Winners beat losers by a 4-3 margin on the New York Stock Exchange.

The recovery began as early news of a surprisingly big drop in wholesale prices in February helped ease concerns that the Federal Reserve Board would raise rates in a bid to ward off inflation.

The producer price index fell 0.4% last month, a bigger drop than economists had forecast, and the core rate, which excludes volatile food and energy prices, fell 0.1%, instead of rising 0.1% as predicted.

Bonds rebounded, with the yield on the 30-year Treasury bond falling as low as 6.91% before settling at about 6.94%. On Thursday, the yield jumped as high as 6.98%, threatening to touch 7% for the first time in nearly six months. The prospect of rapid inflation makes a fixed-income investment such as bonds less attractive, forcing prices down to improve their yield.

The PPI report cast doubt on forecasts that the nation’s central bank will raise rates at its March 25 policymaking meeting.

But the severity of Thursday’s sell-off, analysts said, means the market had room to advance even without a clear green light on the interest rate front.

Technology stocks were unable to hold early gains, and the Nasdaq composite index fell 0.31 point to 1,292.97, capping a loss of 18.83 points for the week.

The Standard & Poor’s 500-stock list rose 3.61 points to 793.17, and the NYSE’s composite index rose 1.83 points to 417.70.

Among Friday’s highlights:

* The Dow’s two biggest gainers were among those in the index hit hardest in Thursday’s sell-off. Procter & Gamble jumped 4 5/8 to 125 3/4, Disney climbed 1 1/2 to 74 1/4 and Philip Morris, which plunged more than 10 points Thursday amid renewed worries about health-liability suits against the tobacco industry, rose 3 1/8 to 129 1/8.

* Retailer Wal-Mart Stores, which will become one of the 30 Dow industrials on Monday, fell 1/4 to 28 3/4 as retailers slumped late in the day. Among the others that will be added, Hewlett-Packard fell 1/4 to 55 3/8, Johnson & Johnson fell 1 1/8 to 57 5/8 and Travelers Group gained 3/8 to 53 1/4.

Woolworth gained 7/8 to 23 1/8 on its last day as a Dow stock. The day was also good for the others leaving the Dow: Bethlehem Steel rose 1/8 to 8 1/2, Texaco gained 5/8 to 101 1/4 and Westinghouse rose 3/8 to 19 1/4.

* Nasdaq’s decline came despite a 4 7/8-point jump to 41 by software maker Oracle, which posted solid earnings late Thursday. Offsetting Oracle’s gain were late pullbacks by Intel, down 3 3/8 to 137 7/8, and Dell Computer, down 2 1/8 to 70 1/8.

Tech issues in general were mixed. Computer Associates International jumped 2 1/8 to 41 3/4, Autodesk gained 1 1/8 to 34 1/2 and Peoplesoft rose 5/8 to 42 7/8. Microsoft fell 5/8 to 99 in a late-day slump.

Advanced Micro Devices dropped 2 7/8 to 44 1/2. Intel said it sued the chip maker and rival Cyrix for alleged infringement of Intel’s trademark for the MMX computer chip. Cyrix fell 1/8 to 22 1/8.

* Employee Solutions, which helps companies manage employee benefits and salaries, was the most active stock, tumbling 9 1/8 to 6 1/4 after saying its quarterly results will fall below expectations.

* Fluor fell 6 3/4 to 57 3/4 after several Wall Street firms downgraded the shares.

In currency trading, the dollar reached an intraday high against the yen on the positive economic news. The dollar hit 124 yen, the highest since Feb. 19, before settling at 123.38, down from 123.41 on Thursday.

Overseas, Tokyo’s Nikkei stock average rose 0.1%, Frankfurt’s DAX index rose 0.3% and London’s FTSE-100 rose 0.6%.

Market Roundup, D4