NEW YORK -- A strong decline in interest rates and the prospect of more to come, lifted the stock and bond markets sharply yesterday.
Trading was slow, but the advance carried the Dow Jones industrial average ahead 44.80 points, to 2,488.61.
Heavy declines Tuesday and Wednesday, however, sent the Dow to a loss for the week of 2.23 points.
Abby Joseph Cohen, market strategist for Goldman, Sachs & Co., attributed yesterday's strong showing partly to "the hope that we're closer to a resolution in the Middle East."
But Mrs. Cohen said that more important yesterday was the decline in interest rates stemming from the better-than-expected report on the Producer Price Index.
The Labor Department said the index climbed 1.1 percent last month after rising 1.6 percent in September and 1.3 percent in August.
But the report showed no rise in core producer prices, excluding food and energy.
"Equity investors are doing the natural thing," she said.
"Lower interest rates are good for stocks. However, I think it's a mistake because interest rates are falling due to a weak economy.
"A weak economy is good for bond prices, but not for stock prices, and that's because pressure on the economy means pressure on corporate profits."
Mrs. Cohen said she looked for a further market decline.
"I think that while investors are focusing on the positive aspects of lower interest rates, stock prices can rise somewhat. However, I don't think it's sustainable. Corporate profits will continue to be weak and continue to come in lower than expectations," she said.
Traders turned yesterday to all the usual suspects in explaining the market's rise.
With the likelihood that war, if it comes, may not start until after the holidays, crude oil prices fell sharply, sliding $1.64 a barrel, to $33.89.
Some said that because of the sluggish economy and almost daily signs that it continues to weaken, they are looking for the Federal Reserve Board to take action soon to cut interest rates.
The most likely time, they said, could be soon after next Tuesday when the Fed's Open Market Committee discusses monetary policy. What to do about interest rates is expected to be high on its agenda.