Inflation News, Earnings Gains Drive Stocks Up

The summer rally rolls on.

Stocks finished broadly higher Thursday, buoyed by the latest report showing inflation remains under control.

Some strong second-quarter earnings reports also helped the market sentiment.

The Dow Jones industrials gained 38.31 points to 11,186.41 as winners topped losers by 18 to 10 on the New York Stock Exchange.

Once again, the hottest action was in technology stocks, lifting the Nasdaq composite 0.8% to a record 2,839.37.

The Nasdaq index, now up 29.5% year to date, has surged 12.8% over the last month. The Dow, by contrast, is up 3.7% over the last month.

Broader indexes such as the Standard & Poor’s 500 and the NYSE composite joined Nasdaq at new highs Thursday.

Before the start of trading, the Labor Department reported that consumer prices held steady in June for the second straight month--the best showing since 1986, when prices fell for three months in a row.

The lack of inflation makes it less likely that the Federal Reserve will raise interest rates again in the near future, many analysts say.

Still, the bond market isn’t so sure. Treasury yields were mostly unchanged Thursday despite the favorable inflation news. The 30-year T-bond yield held at 5.91%.

“There’s certainly no panic about inflation,” said James O’Sullivan, an economist at J.P. Morgan Securities Inc. Nonetheless, he said, “more Fed rate increases in 1999 are still very much a risk” if the U.S. economy doesn’t slow.

In commodities trading, gold--the traditional inflation hedge--continued to sink. Near-term futures in New York slipped 30 cents to $254.70 an ounce, a 20-year low. Gold has fallen 12% year to date, hurt in part by sales of the metal by central banks.

In foreign trading, British and French shares were up strongly, and Japan’s powerful rally continued, with the Nikkei-225 up 0.4% to 18,431. Argentina’s market continued to stabilize after diving early in the week.

Among Thursday’s highlights:

* Tech stocks were led by firms that improve the infrastructure of the Internet by providing such things as faster data speeds. Efficient Networks, a broadband-access equipment maker, went public at $15 and soared to close at $51.13 on Nasdaq. It trades under the ticker symbol EFNT.

The company’s equipment is used by smaller businesses and consumers to transfer data to and from the Net over copper phone lines more rapidly than is possible through standard modems.

Among other Net infrastructure stocks, F5 Networks soared $17.81 to $71.25, Redback Networks leaped $30 to $188.50 and Juniper Networks surged $17.44 to $149.50.

* Also in the tech sector, Hewlett-Packard surged $4.56 to $113, Cisco Systems gained $1.25 to $66.56 and Texas Instruments rose $3.25 to $153.25.

* Stocks rising on earnings news included Coca-Cola, up $2.13 to $64; Cummins Engine, up $3.63 to $60.56; and Visx, up $1.19 to $93.19.

But Apple Computer fell $2.69 to $53.25 despite beating profit expectations. Inktomi lost $4.50 to $124.38 after its report. US Airways slid $3.44 to $40.88 after warning that second-half earnings will be hurt by weaker revenue.

* Santa Monica-based Stamps.com surged $12.63 to $45.38. The Postal Service on Wednesday demonstrated two brands of software for buying postage over the Internet--Stamps.com’s and a rival brand from E-Stamp. The service is expected to approve a system this fall.

* National Information Consortium went public at $12 and jumped to $17.31. The company provides Internet-based electronic government services. Its ticker symbol is EGOV.

* MGM shot up $2.13 to $21.63. The company on Tuesday held a bullish annual shareholder meeting with its new management team.

Market Roundup, C6