FINANCIAL MARKETS : Stocks Bound Ahead as Bond Yields Slip

Stocks surged for a second straight day Tuesday as investors sought bargains after last week’s selloff.

Treasury bonds rallied as the market was treated to reassuring news on economic growth and inflation.

The stock market’s advance impressed analysts because it came despite a midafternoon selloff that temporarily knocked broad market gauges back near their starting points of the day.

The Dow Jones industrial average ended at 4,436.44, up 40.81 points and only a point below the previous peak of 4,437.47 hit May 15.

Among the record setters was Standard & Poor’s 500-stock index, which climbed 4.93 points to 528.58. That narrowly beat the old mark of 528.19 set May 16.

Strength in technology stocks boosted the Nasdaq composite index 8.46 points to a new high of 879.64. The NYSE Composite index added 2.28 points to close at 283.80.

Heavy volume on the New York Stock Exchange was also regarded as a healthy omen for stocks. Big Board volume swelled to 362.68 million shares from 286.26 million on Monday.

Advancing NYSE stocks outnumbered decliners by about 7 to 4. The NYSE composite index rose 2.28 points to 283.80.

Analysts said the Federal Reserve Board’s decision to leave interest rates unchanged touched off a brief flurry of selling in stocks, even though the central bank had been widely expected to take no action.

But the market came back strongly near the close.

The Fed’s policy-setting arm, the Federal Open Market Committee, met privately for about three hours and adjourned until July 5 after apparently deciding to leave rates alone.

The vibrant bond market also lent support to equities. The yield on the benchmark 30-year Treasury bond fell to 6.86% from Monday’s 6.92%, while its price, which moves in the opposite direction, gained 23/32 point, or $7.19 per $1,000 in face value, compared to Monday.

It is “the power of the bond market translated directly into renewed strength in the technology area and also in the cyclical area,” said A.C. Moore, senior investment strategist at Dunvegan Associates Inc. in Santa Barbara.

A perception that last week’s slide in stocks, which drove down the Dow industrials by about 82 points Thursday, pushed prices to attractive levels.

Investors regarded the drop as a buying opportunity rather than a major turning point or a signal to lighten their equity holdings.

Elsewhere, the dollar ended mostly higher Tuesday after recovering from a bout of weakness in Europe, where investors were drawn to German marks because of fears about the new French government’s economic agenda.

In New York trading, the greenback ended at 87.16 Japanese yen, down from 87.33. It was changing hands in New York at 1.443 marks, up from 1.441.

Among Tuesday’s highlights:

* Technology companies continued their strong advance, with Texas Instruments up 4 1/2 at 124 1/8, IBM gaining 2 to 97 1/4, Motorola up 2 1/8 at 61 7/8, Compaq up 1 7/8 at 41 3/4 and Intel up 2 1/2 at 116 1/2.

* Some profit taking was seen in cyclical stocks, analysts said. Among them, Caterpillar was down 2 1/2 at 60 1/4 and Deere lost 3 1/4 at 86 1/2.

* Among individual issues, Crown Cork & Seal soared 5 1/2 to 47 1/4 in reaction to the company’s $5.2-billion bid for France’s Carnaud MetalBox.

* EMC rose 1 1/2 to 23 5/8. On Monday, the company said MCI had decided to use one of its technologies.

* Republic Waste Technologies rose up 2 11/16 to 10 7/16 as investors reacted positively to news that H. Wayne Huizenga plans to take the helm of the company.

* Rawlings Sporting Goods fell 1 1/2 to 10 1/8 after it reduced its 1995 revenue estimate.

Overseas, Tokyo’s 225-share Nikkei average finished ahead 127.03 points at 15,916.15.

Frankfurt’s 30-share DAX average ended down 2.82 points at 2,080.35. London’s FTSE-100 average closed at 3,291.8, up 7.3 points.

Mexico’s Bolsa index ended 6.02 points higher at 2,096.90.