Business Notes Wall Street

If the U.S. economy is in such dismal shape, how come Wall Street feels so good? After five consecutive daily increases, the Dow Jones industrial average closed at a record 3101.52 last week. The bull run has pushed the Dow index up 167 points, or nearly 6%, since Dec. 20. That was the day the Federal Reserve Board lowered the discount rate -- which is what the Fed charges banks for borrowing money -- a full percentage point, to a 27-year low of 3.5%.

Wall Street's euphoria reflected investors' hopes that rock-bottom interest rates would help end the economic slump. "The stock market is predicting a recovery," said Allen Sinai, chief economist for the Boston Company Economic Advisors. Investors, he noted, expect the fall in rates to reduce the interest burden of debt-laden companies and thereby boost corporate profits.

But the market can be a clouded crystal ball. Although stocks surged during the allied victory in the gulf war in March, the economy later faltered.

CHART: NOT AVAILABLE

CREDIT: TIME Graphic

CAPTION: Dow Jones average at week's end