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Dow tops 7,500 in wild ride Bull market record is third milestone in 3 days, 24th for year; 'A life all its own'; Strong economy, time of peace in nation get credit for stock surge

Stocks marched higher yesterday, propelling the Dow Jones industrial average to its first close above 7,500 points in its 100-year history.

Surging stocks have analysts predicting that the longest-ever bull market will keep running through the summer and maybe late into the year. Some of them believe that the Dow -- the closely watched index of 30 blue-chip stocks, will reach 8,000 points before it retreats significantly.

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"What you've got here is a market that has taken on a life all its own," said Richard Fontaine, who runs the Fontaine Capital Appreciation Fund in Towson. "As long as people's money keeps growing, they will keep sending more money in."

"It's incredible," added David Straus, senior portfolio manager with Washington-based J. L. Capital Management Inc., a subsidiary of Johnston, Lemon & Co., said of the continued bull market. "I would be surprised if you have got any major downturn here in the summer."

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The Dow jumped 60.77 points yesterday to close at 7,539.27, marking the third straight record-setting day and its 24th record of the year. The index has risen nearly 17 percent since the beginning of the year and 33 percent in 12 months. In the last 28 trading days alone, it's up 500 points.

The Standard & Poor's 500 index, which measures the performance of a broad range of companies, closed at a record 865.27 yesterday, up 2.36 points. It has risen 16.81 percent since the beginning of the year.

Nasdaq's composite index, full of computer, semiconductor and related stocks, was the lone laggard among the major indexes. It fell 10.35 yesterday to 1,401.69. But it has risen 16.7 percent since it hit a low for the year of 1,201.00 on April 2.

Analysts said that the stock market is surging because the nation's economy is stronger than ever. Unemployment, inflation and interest rates are all at low levels, and corporations are humming with profits.

"The fundamentals are just so strong," said Bill Meehan, market analyst with New York-based Prudential Securities Inc. "Things are different this time."

What's different?

There are no prospects of war on the horizon, which would demolish the rally, Meehan said. And foreign investors haven't yet flocked to the U.S. stock market; when they do, it is typically a signal that stocks have peaked.

Added to that, corporations keep making money and have exceeded the expectations of the analysts who follow them.

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"When we get the second quarter [numbers], higher profits will just add fuel to the fire," Meehan said. "This bull market is alive, it is very well, it appears destined to once again foil the consensus."

Straus sees the Dow rising another 500 points to 8,000 by the end of the year.

Others are even more bullish.

Ralph J. Acampora, head of technical research for Prudential, predicted at the beginning of the year that the Dow would reach 8,250 by the end of 1997. Now, Meehan said, Acampora is revising his prediction upward. But Meehan declined to reveal the number.

What makes the analysts so confident in the continued running of the bulls is that more investors are buying stocks of smaller companies. In past months, the market's rally was driven by a narrow group of large companies such as Microsoft Corp., Intel Corp., Coca-Cola Co. and General Electric Co.

But now, smaller companies, including technology stocks, are benefiting.

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The Russell 2,000 index, a barometer of small company performance, shot up 11 percent in May alone, more than double the performance of the Dow Jones industrial average. It fell 0.59 yesterday to 387.31. Still, it's up 6.81 percent for the year.

Shares of small companies "probably have another couple of months of rally worth in them," Straus said.

"It has gotten to the point where you like to see markets with broad leadership, because they tend to last longer."

Fontaine, who is bearish on the stock market and likes to invest in companies that mine gold and other minerals, thought the rally should have ended by now.

Investors, Fontaine argues, are paying too much for stocks, but they don't care because the market keeps rising. "It continues to amaze me," he said.

Pub Date: 6/11/97


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