Stocks Hit Post-Crash High --- Bonds Join the Rally As Inflation Fear Ebbs
NEW YORK -- Investors declared the Federal Reserve the winner of the latest skirmish in its war against inflation, and pushed the Dow Jones Industrial Average to a post-crash high.</br></br>With the March consumer price index up 0.5%, slightly below expectations, investors exuberantly bid the industrials up 41.61 points to 2379.40 in heavy trading.</br></br>Bond prices rallied, too, with the yield on the Treasury's benchmark 30-year bond slipping below 9% for the first time in more than two months. But foreign exchange traders, seeing the U.S. economy slowing and the prospect for higher interest rates fading, pushed the dollar lower against major currencies.</br></br>"It looks like the Fed's won," said Robert J. Barbera, chief economist at Shearson Lehman Hutton. "It looks like the inflation numbers are manageable and the economy is clearly slowing."</br></br>The perception of a slowing economy was further bolstered by a surprising 5.4% drop in March housing starts and a 13.7% decline in building permits. Because the housing industry is hypersensitive to interest rates, investors interpreted the declines as evidence that higher interest rates are cooling the economy.