A rebounding dollar Wednesday gave the stock and bond and markets a lift.
Treasury bond yields plunged as the dollar recovered a bit from Tuesday's historic slump against the German mark and Japanese yen, temporarily allaying fears of higher inflation and rising interest rates.
The yield on the Treasury's bellwether 30-year bond closed at 7.54%, off from 7.62% on Tuesday, as its price shot up 7/8 point, or $8.75 per $1,000 in face amount. Prices and yields move in opposite directions.
On Wall Street, the Dow Jones industrial average gained 16.60 points to close at 3,979.23.
Both the bond and stock markets had been dragged down over the past few days as the dollar fell. A weak dollar can fuel inflation by driving up the cost of imported goods, and inflation erodes the value of fixed-income investments such as bonds.
Bond investors have been worried that the Federal Reserve might raise interest rates to support the dollar and to stop investors' looking elsewhere for better returns. (Higher rates make existing bonds worth less.) On Wednesday, however, the dollar improved against other major currencies after Federal Reserve Board Chairman Alan Greenspan, in testimony before the House Budget Committee, described the currency's recent decline as "unwelcome and troublesome" but did not signal that the central bank would raise interest rates to support it.
The U.S. currency rose to 1.394 German marks in New York from Tuesday's record low of 1.370 marks. It also rebounded to 91.33 Japanese yen, up from Tuesday's 90.05.
Stocks opened higher as the dollar became firmer, backed off a little, then resumed climbing in late morning and never looked back.
In the broader market, advancing issues outnumbered decliners by 1,129 to 1,052 on the New York Stock Exchange. Big Board volume was moderate at 349.7 million shares, down from 355.53 million on Tuesday.
Although large-capitalization issues took the lion's share of the gains, broad market indexes went higher also, thanks mostly to firmer technology issues.
The NYSE composite index rose 0.35 point to 261.60. The Standard & Poor's 500-stock index added 1.02 points to 483.14.
The Nasdaq composite index climbed 4.48 points to 795.81. The American Stock Exchange market value index advanced 0.21 point to 449.95.
Investors were buying the issues of large international companies that "might actually benefit from the weak dollar," said Joseph McAlinden, chief market strategist at Dillon, Read & Co. U.S. exports become cheaper as the dollar falls.
Among Wednesday's highlights:
* General Electric rose 5/8 to 53 1/4. Philip Morris, another big exporter, added 1/4 to 63 1/8.
Oil stocks moved higher on the expectation that international oil producers, who are paid in dollars, would cut production to buck up the price of oil. Among the Dow 30 components, Texaco rose 1 1/8 to 65 3/8, Exxon added 3/4 to 64 3/4 and Chevron climbed 5/8 to 47 5/8.
Interest-sensitive stocks such as financial and utility issues did not perform well, however. Investors have worried that the weakened dollar could force the Federal Reserve Board to raise interest rates, which could squeeze margins at these companies. Citicorp lost 1 to close at 40.
Microsoft rose 3 5/32 to 68 1/2, hitting a 52-week high as investors seemed more confident the software company's new Windows 95 operating system would be shipped on time.
* Precious metals firms retreated as the price of gold dropped on the dollar's improvement. Barrick Gold fell 7/8 to 22 3/8, Homestake Mining fell 1 to 16 1/4, Placer Dome fell 3/4 to 21 1/8; Echo Bay fell 1/2 to 9 3/8 and Royal Oak Mines fell 1/8 to 3 3/16.
Gold lost $4.50 on the New York Merc, settling at $380.90 an ounce. The contract had risen $7.60 in the two previous sessions to a six-week high. Silver dropped 13.3 cents to $4.562 an ounce.
* Compaq dropped 1 1/4 to 32 7/8 after the computer maker cut prices on its new ProLinea and Deskpro lines and unveiled 118 new models.
* Checkpoint Systems fell 5 3/8 to 17 5/8. The company said it would break even or post an operating loss in the first quarter.
* Lin Broadcasting retreated 7 1/4 to 121 after an independent appraiser said AT&T; must spend $127.50 per share, or $3.26 billion, to acquire the 48% of Lin that it does not already own. AT&T; was up 1/4 at 51 1/4.
* Nextel Communications gained 1 to 14 1/2. The Federal Trade Commission said it will allow Bell phone companies to own and operate dispatch companies, clearing the way for an acquisition of Nextel.
* Dell Computer added 1 to 42 3/8. Bear Stearns upgraded the stock to "buy" from "attractive."
Overseas stocks were mixed. Tokyo's 225-share Nikkei average ended down 333.97 points at 16,621.31, and Hong Kong's Hang Seng Index fell 208.67 points or 2.56% to 7,929.99. In Frankfurt, the 30-share DAX average closed down 28.13 points at 2,025.21.
London's FTSE-100 average managed to close higher, gaining 15.1 points to close at 2,992.1. Mexico's Bolsa index dropped 25.68 points to 1,498.52.