Jobs and Upbeat Forecasts Push Dow to 7,400

Stocks again surged to record highs Friday and lifted the Dow Jones industrial average above 7,400 for the first time, as a solid jobs report and bullish White House comments reinforced investors’ optimism.

The Dow Jones average of 30 industrials jumped 130.49 points to a record 7,435.78, surpassing its old high of 7,383.41 set May 27. The blue-chip measure gained 104.74 points for the week, and is up 15.3% for the year so far.

Broader market measures also rose sharply, including the Standard & Poor’s 500, which soared 14.58 points to a record 858.01. The Russell 2,000 index of smaller stocks climbed 2.15 points to 387.14, its second new high in as many days.

Stocks took their cue from the credit markets, where bond prices rose sharply and their yields fell after Treasury Secretary Robert Rubin said the “probability is very high that inflation will remain at low levels.”

“The country is in very good shape to remain strong economically for a long time,” he said at a news conference in Washington.

Wall Street seized his remarks as evidence that, with inflation low, the Federal Reserve Board will see no reason--at least not any time soon--to slow the economy by raising interest rates. It’s the threat of higher rates--and their adverse impact on corporate earnings, economic growth and bond prices--that can send stock prices lower in a hurry.

Instead, “the economics supporting this market are firmly in place: primarily a growing economy with inflation that’s almost dead,” said Alan Skrainka, chief market strategist for Edward D. Jones, a St. Louis-based brokerage firm that mostly serves individual investors.

“The latest quarter was the 17th consecutive quarter in which corporate profits [on average] exceeded analysts’ expectations, and that hasn’t happened in 20 years,” Skrainka said.

The yield on the 30-year Treasury bond skidded to 6.78% from 6.87% late Thursday, and the bond’s price--which moves inversely to its yield--climbed more than a point, or about $12.50 for every $1,000 in face value.

Rubin’s comments also helped ease some concern on Wall Street that the vibrant jobs report for May might be signaling the type of overheated economy that could soon prompt the Fed to raise lending costs.

The Labor Department said U.S. unemployment sank to 4.8% in May, its lowest level in 24 years. It also said payrolls rose modestly in May after a big jump in April.

To be sure, there’s still caution among some experts.

Rao Chalasani, chief investment strategist at Everen Securities in Chicago, said the economy “has been creating jobs at a rate of 229,000 a month through this year, and my feeling is that rate of growth is still much too strong for the bond market to feel extremely comfortable” that the central bank won’t be compelled to hike rates.

Caution wasn’t much evident Friday, though. More than two stocks rose for every one that fell on the New York Stock Exchange, where trading volume was a brisk 488.9 million shares, up from 452.6 million Thursday.

The rally was paced by cosmetics, broadcasting, drug and brokerage and other financial-services stocks, including J.P. Morgan, which gained 2 3/4 to 111 1/2, and Travelers Group, which gained 1 3/4 to 57 7/8.

Other highlights:

* All but three of the Dow Jones industrials moved ahead. General Electric rose 2 to 62 1/4, Sears Roebuck gained 1 1/8 to 50, and Merck was up 3 at 92 1/4.

* In the rebounding technology sector, Dell Computer rose 3 11/16 to 112 1/8, Oracle gained 1 1/2 to 49, and 3Com climbed 2 1/8 to 46 5/16.

* But companies with disappointing earnings announcements were pummeled, as usual. They included SGS-Thomson Microelectronics, down 4 3/4 to 75 3/4; First Brands, off 3 3/8 to 22 5/8; and Champion Enterprises, down 7/8 to 14 7/8.

In foreign exchange trading, the U.S. dollar was mixed against most other major currencies. The greenback briefly hit nearly a 3 1/2-year high against the German mark, but then fell back amid rumors Germany would seek a 2-year delay in Europe’s currency integration.

The mark, the dominant currency in Europe, has tended to strengthen on news of a possible delay in the single currency plan. The dollar reached an intra-day high of 1.7423 marks in New York before settling at 1.7258 marks, down from 1.7288 Thursday.

Times wire services contributed to this report.