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Stocks posted modest gains in choppy trading Friday, lifting market indexes to new record highs as stocks and bonds stabilized after plunging on fresh evidence that the economy has not slowed enough.

The Dow Jones industrial average, which rebounded 14.87 points to a new record-high 4314.70 Thursday, edged up 6.57 points to 4321.27 after recovering from an initial 30-point drop.But a sharp loss in Dow component IBM limited the blue-chip indicator's advance. IBM, the third most active Big Board issue, dropped 21/4 to 945/8 on profit taking.

The New York Stock Exchange composite index edged up 0.44 to 277.31, while Standard & Poor's 500-stock index rose 1.16 to 514.71 for their second consecutive record-high closes. The average price of a share gained 5 cents.

Advances outdistanced declines 1,101-1,071 among the 2,953 issues crossing the NYSE tape.

Adjusted volume eased to 320,235,000 shares from 350,851,000 in the same period Thursday.

Prices ended slightly higher on the American Stock Exchange and modestly higher on the Nasdaq Stock Market.

The Nasdaq composite index rose 3.03 to 843.98 for its third straight record-high close.

Treasury securities ended slightly lower, while the U.S. dollar finished higher.

The dollar changed hands at 1.3869 German marks and 84.20 Japanese yen, up from 1.3780 marks and 83.70 yen late Thursday.

The bellwether 30-year Treasury bond, which eased 3/32 Thursday to yield 7.33 percent, slid 2/32 to 103 14/32. The issue's yield, which moves in the opposite direction of its price, was 7.33 percent.

Traders said the bond market showed resilience by bouncing back from a mid-morning drop that was precipitated by the Chicago Purchasing Management Association's report that its index of area business activity rose to 57.6 percent in April from March's 55.0 percent.

Economists and analysts view the Chicago survey as a precursor of the National Association of Purchasing Management report, which comes out Monday.

In overseas trading, the Tokyo stock market fell back slightly as many investors stayed away ahead of next week's Golden Week spring break.

London closed slightly lower as earlier gains eroded following Wall Street's negative reaction to U.S. economic data, while Frankfurt and Paris also eased further amid profit taking ahead of the three-day May Day holiday.

As for Wall Street, Michael Metz, chief investment strategist at Oppenheimer & Co., attributed the late recovery in bonds - and in turn stocks - to a realization that although the Chicago purchasing managers' report indicated continued economic growth, "the momentum was not excessive."

He said the dollar's strength was "another positive factor" that helped the stock and bond mar-kets.

"I'm impressed by the resilience of the stock market," Metz added, with technology issues "again leading the way, although there's profit taking in some stocks like IBM."

Trude Latimer, vice president and chief market strategist at Ferguson Andrews & Associates Inc. in Charlottesville, Va., said bonds' reversal of a strong start triggered program selling and profit taking in stocks.

But Latimer welcomed the sell-off, saying that she "would love to see the market pull back. The market is overbought. It needs a rest."

Wall Street opened narrowly mixed as the market took its lead from bonds, which rose then pulled back following the government's report on economic growth in the first quarter.

Shortly before the market opened, the Commerce Department reported that the economy grew at an annual rate of 2.8 percent in the first quarter, the slowest advance in 18 months as consumers put the brakes on spending.