Dow surges 55.64 to top 3,500, a record


Recovering unexpectedly from a late-morning 30-point deficit stocks boomed ahead late yesterday, with the Dow Jones industrial average surging 55.64 points to close at a record high of 3,500.03.

Short-covering -- panicky buying by traders who had expected to replace sold shares at lower prices -- and a sharp drop in interest rates and gold prices triggered the spectacular rally.

WALL ST. WISDOM: "These stocks were good enough for my husband and me in the Depression, Westy, and they're good enough for me now. Despite what you suggest I'm not going to make any changes." (Miriam G. Joffee, my first mother-in-law, who was widowed with a modest blue-chip stock portfolio in 1934 and made not one single change in the 50 years that she lived thereafter. She traveled widely and lived well on the increasing yearly dividends.)

MARYLAND MAILBAG: Legg Mason's Gerald Scheinker (486-8010) will mail his firm's 21-page "Income Buy List" with detailed descriptions and summaries of each stock. The utility stocks, with percentage income after each name, include Wisconsin Energy (4.7), Central Maine Power (6.6), Dominion Resources (5.5), NIPSCO Industries (4.1), Eastern Utilities (5.2) and Philadelphia Electric (4.6) . . . Phone PaineWebber's Marvin Fribush (576-3220) for a 12-page booklet, "Reasons To Consider Tax-Advantaged Investments in View of Proposed Higher Tax Rates." The brochure contains many specific tax-saving suggestions.

HOPEFULLY HELPFUL: Under "Yields for the Mass Market," Grant's Interest Rate Observer comments, "In flight from 3 percent, a person may buy a cat or a dog instead of a yield. Wall Street will always sell what comes to hand." . . . "The well-to-do are aware that their income taxes are likely to go up under President Clinton's tax proposal [but] many people have yet to figure out how changes in one part of the law -- the alternative minimum tax proposals -- will affect them. A lot more people are likely to fall under the alternative minimum tax (AMT) this year." (New York Times, May 15). Ticker suggestion: See your tax person promptly on this AMT matter. A large capital gain could hit you unexpectedly. . . . If you are interested in a blue-chip investment, read the Fortune (May 31) cover story on Coca-Cola, titled, "The World's Best Brand." Adjusted for splits, the stock has zoomed from $4 a share in 1983 to about $40 at midweek.

TAX SAVERS: "Consider investing in tax-free municipal bonds. The value of tax-free investments goes up as tax rates rise. It will pay you to compare the yield you can get from a municipal bond or bond fund with the after-tax yield on fully taxable investments. At the 31 percent bracket you would have to get 7.25 percent from a taxable investment to equal a 5 percent tax-free bond return. If your tax rate goes up to 39.6 percent, you'd have to get 8.28 percent from a taxable investment to break even with a 5 percent municipal bond." (Ernst & Young) . . . "The Clinton tax bill, which passed its first major congressional hurdle last Thursday, makes tax-free bonds more inviting than ever." (New York Times, May 17)

LOOKING AHEAD: Tomorrow night, "Wall Street Week With Louis Rukeyser" spotlights the spring apparel scene with guest Josephine Esquivel, senior vice president, Lehman Bros., with panelists Elizabeth Dater, Mary Farrell and Robert Stovall. Next week, Louis Rukeyser brings "Wall Street Week" from Tokyo. . . . Thursday, May 27, Baltimore Security Analysts will have Mayor Kurt L. Schmoke at the Hyatt Hotel at noon. . . . Investment Counselors of Maryland says, "It is difficult to envision broad market averages advancing farther unless interest rates decline further [but] we remain optimistic regarding equity portfolio returns and believe selection will be crucial."

STOCK WATCH: "Buy! Buy! Buy! The Blue Chip Value index is selling at historic lows. This is a once-in-a-decade opportunity to own the best companies in America at a significant discount." (The Blue Chip Correlator) . . . "Tremendous strength in gold suggests a declining stock market." (Dines Letter) . . . "Secondary stocks are likely to strengthen markedly in the coming months. The blue chip outlook also remains favorable, with a likely advance to the 3,650 level." (Hussman Econometrics) . . . "We are deeply concerned about the lack of leadership from both the administration and Congress, and believe the market is vulnerable to a decline in confidence which could set the stage for a correction of greater magnitude than that seen since this leg of the bull market which began in late 1990." (Rauscher Pierce Focus) . . . "Upside potential continues to be limited by high valuations, while the downside is contained by the liquidity that makes bargain-hunters quick to move in." (S&P; Outlook, May 19) . . . "Financial stocks should do well in the current environment, especially banks like Citicorp, Banc One and NationsBank." (Abby Cohen, portfolio strategist, Goldman, Sachs & Co.)

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