Business Notes FINANCIAL MARKETS

Rising interest rates usually bring gloom to the stock market, since they can presage a slowing economy. But stocks are doing the unexpected. Last Friday the Dow Jones industrial average closed at 2226.07, its highest level since Oct. 16, 1987, the Friday before Black Monday. It was up 32 points for the week and 57 points since Jan. 1.

Why the bullishness? The economy's proven resilience is one reason, but many investors simply cite the bandwagon effect: no one wants to miss out on a good rally. Even some small investors, who have generally avoided the market since the crash, have joined the fresh stampede.

These are heady days as well for the U.S. dollar, which has risen 4% against the West German deutsche mark since the beginning of the month. The run-up is a side effect of rising interest rates, which the Federal Reserve has allowed to climb as a means of preventing inflation. But the U.S. and most European central banks decided last week to restrain the dollar by intervening in the currency markets. Reason: U.S. progress in narrowing its trade deficit is likely to be hampered by too strong a currency, since it increases the prices -- and reduces the competitiveness -- of American products.

CHART: NOT AVAILABLE

CREDIT: TIME Chart by Joe Lertola

CAPTION: Dow Jones industrials, weekly closings