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Blue chips post solid gains

on drop in interest rates

NEW YORK: Blue-chip stocks overcame a selloff in technology stocks and closed sharply higher Friday, propelled by a steep drop in long-term bond interest rates.

The Dow Jones industrial average ended up a solid 20.78 points at 4,601.40. For the week, it fell 16.20 points.

In the broader market, advancing issues led declines 1,280 to 845 in slow trading of 255 million shares on the New York Stock Exchange.

Analysts said the market's surge may have been exaggerated by the typically thin, late-summer trading.

"We've been in a seven-week hibernation. The bears have strutted their stuff but sure didn't show much," said Alfred Goldman, technical research director of A.G. Edwards.

The Nasdaq composite index lost 0.96 point to 1,019.97 amid a drop in high technology stocks.

In the bond market, the yield on the key 30-year Treasury bond plunged to 6.71 percent from 6.82 percent on Thursday.

Analysts said the bond market ignored news of stronger-than-expected July existing home sales but Thursday's weak durable goods report for July was still on many traders' minds.

The National Association of Realtors said sales of existing homes rose 5 percent to an annual rate of 3.99 million. Economists had expected a rate of 3.84 million.

Orders for durable goods tumbled 1.7 percent in July, far worse than expected by Wall Street and much worse than in June when they retreated 0.3 percent.

"There is hope the Fed will cut rates ... and maybe it'll happen but the Fed will need to see more signs of weakness," said Don Hays, analyst at Wheat First Securities. The Fed will hold its next policy-setting meeting on Sept. 26.

He believes that the Fed may hold off on any further easing until November.

Meanwhile, profit-taking in the technology group tempered buying enthusiasm.

"There's a lot of indecision here and people will use that to sell more technology stocks," said Chris Willox, a trader at BT Brokerage.

Microsoft Corp. fell 1-3/4 to 94-3/8 after shedding 1-3/4 Thursday on the day of the much-heralded launch of Windows 95.

International Business Machines lost one to 103-7/8, Intel Corp. was off 21/64 to 60-3/8 and Hewlett-Packard fell 2-1/4 to 78-7/8.

But Berkshire Hathaway's deal to buy the rest of GEICO Corp. shares that it doesn't already own for $2.3 billion, or $70 a share, spurred buying in other insurance stocks.

GEICO soared 12-7/8 to 68-5/8, General Re rose 4-1/4 to 147-1/4, AIG added two to 78-3/4 and Chubb Corp was up 1-3/8 to 93-1/2.

"If Warren Buffett thinks there's value there, then people wonder who else," a trader said. Buffett has built up a huge fortune from the business of buying and selling stocks.

Silver King shares skyrocketed 53 percent or 13-5/8 to 39-3/8 on news that Barry Diller will acquire a 20 percent stake in the company at $22.625 a share.

The Standard & Poor's composite index of 500 stocks rose 2.64 to 560.10. The American Stock Exchange index was up 2.05 to 530.97.

The NYSE Composite index of all listed common stocks rose 1.50 to 300.85. The average share was up 18 cents.

The Wilshire Associates Equity Index - the market value of NYSE, American and Nasdaq issues - was 5,580.272 up 21.145 or 0.38 percent.-Reuter