NEW YORK -- U.S. stocks, buoyed by the biggest one-day rally in bonds since March, leapt to record highs yesterday on expectations the economy will generate steady profit growth without inflation.
The advance on the New York Stock Exchange was the broadest in almost six weeks, as Treasury bond yields slid to an 11-month low of 7.24 percent.
The catalyst for both rallies was a government report that predicted weaker economic activity over the next six months.
"Everybody has been expecting a slowdown, and now we're in the teeth of it," said William Harnisch, president and chief investment officer of Forstmann-Leff Associates Inc., which manages about $3 billion for institutional investors and hedge funds.
The Dow Jones industrial average jumped 44.27, to 4,373.15, its 24th record close this year and its largest daily advance since March 24. Philip Morris Cos., Eastman Kodak Co. and International Business Machines Corp. led a charge that lifted 23 of the average's 30 components.
Other big, multinational companies soared on optimism that steady growth and a weaker dollar would boost profits in the United States and abroad.
Financial stocks surged amid signs of stable interest rates.
Technology was another winner amid the personal-computer boom and bullish forecasts from Hambrecht & Quist's annual technology conference.
IBM jumped $1.375, to $94.25; Hewlett-Packard Co. leapt $3.125, to $67.50; Texas Instruments Inc. rocketed $5.125, to $110.125; and Intel Corp. soared $3.375, to $107.375. Microsoft rose $1.31, to $80.875, and Cisco climbed $2.50, to $43.50.
The broader Standard & Poor's 500 index soared 5.62, to 520.48, breaking Tuesday's record of 514.86. Semiconductor, drug, tobacco and beverage shares led yesterday's advance.
L The Nasdaq composite index spurted 8.47, to a record 850.26.
Trading was active, with about 392.9 million shares changing hands on the NYSE, compared with an average of 332.63 million over the past three months.
So far this year, stock indexes are up more than 13 percent.
About $2 billion came into U.S. equity mutual funds in the week that ended April 26, according to AMG Data Services Inc. "No one wants to be in cash when the market's flying," Mr. Zipper said.
Stocks and bonds rallied after the Commerce Department said that its main predictor of economic activity for the next six months fell 0.5 percent in March, the largest decline since March 1993 and the first back-to-back decline in the index of leading indicators since 1992. Economists had estimated a 0.4 percent drop.
"With the leading indicators off, I think we're going to see further confirmation of the fact these inflationary concerns are not truly valid," said Jonathan McCann, senior vice president in equity trading at Donaldson, Lufkin & Jenrette Securities Corp.
Earnings growth remains robust, in the meantime. To date, 55.8 percent of the 433 companies in the S&P; 500 that posted earnings for the first three months of the year surpassed analysts' expectations, compared with 27.3 percent that disappointed them.
"The economy looks like it's definitely softening, and that probably rules out an interest-rate increase in the short run," said Jim Benning, a trader at BT Brokerage Inc.