Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, May 15, 1990                   TAG: 9005150568
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A/4   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: NEW YORK                                LENGTH: Medium

SOARING STOCKS EASE CONCERN ABOUT INFLATION

The optimism about stocks reflects a growing belief that inflation and interest rates are headed lower, a sharp turnaround in sentiment from just last month.

"You can almost hear the opinion change," said John Connolly, head of the investment policy committee at Dean Witter Reynolds Inc. "Money that's frozen out of this market wants to get in."

"I think it's a big bull market," said Michael Metz, managing director and investment strategist at Oppenheimer & Co. "Nobody's in the market. Everybody's underinvested."

The widely followed Dow Jones average of 30 blue-chip industrial stocks rose 19.95 Monday to 2,821.53, topping the previous record close of 2,810.15 set on Jan. 2. The average has risen more than 176 points, or almost 7 percent, since April 27.

Broader market indicators also advanced strongly Monday, and about two issues rose in price for every one that declined on the New York Stock Exchange.

The turnaround in sentiment has been so swift that many investors have missed the rally, analysts said. Cautious individuals and institutional investors have built up big cash positions, and they should propel stocks to new highs in coming weeks and months as they put that cash to work, they said.

Stock market activity had been very light and prices had traded within a modest range earlier this year because of concern about prices and interest rates.

Inflation ran at a rate of more than 8 percent in the first quarter, the highest rate since the early 1980s, and other indicators suggested the economy was growing at a too-fast pace that would only worsen price pressures.

Economic indicators for April released in the last two weeks have alleviated many of those concerns. Unemployment edged up to 5.2 percent, wages rose only modestly despite an increase in the minimum wage, and wholesale prices fell.

Most economists believe the Federal Reserve's policy-making body will leave its interest rate stance unchanged at its meeting today. Two weeks ago, many analysts were predicting the Fed would boost rates to combat inflation.

Reflecting that belief, interest rates kept falling Monday after plunging on Friday. Yields on long-term government bonds, which topped 9 percent at the start of the month, fell to 8.58 percent.