FINANCIAL MARKETS : Dow Jumps 45 as Buyers Return

Stocks posted broad and healthy gains for a second straight session Tuesday, driven by positive earnings surprises and another rally in bonds.

The Dow Jones industrial average surged 45.78 points to 4,714.45, adding to Monday’s 27.12-point rise and thus recouping all of last week’s net 67-point loss.

Despite worries last week that profit taking could quickly become severe given the market’s steep rise this year, analysts said many investors continue to believe that stocks will see new highs before any deep decline ensues.

“There is no fear in this market,” said William Bayer, a vice president at PTI Securities.

Tuesday’s advance was led by technology, banking, utility, transportation and casino stocks, among others.

In the broad market, winners topped losers by 13 to 9 on the New York Stock Exchange on active trading volume of 373 million shares.

The Nasdaq composite index of mostly smaller stocks, which took a bigger hit than the Dow in last week’s profit taking, continued to rebound sharply. It gained 15.18 points, or 1.6%, to 993.75.

Traders said another decline in long-term bond yields set a positive tone for stocks. Despite several surprisingly strong economic reports, yields eased for a second day after shooting higher last week.

The 30-year Treasury bond yield dipped to 6.82% from 6.87% on Monday. It stood at 6.97% on Friday, a two-month high.

Bond analysts said the market concentrated on the Labor Department’s report that its employment cost index advanced just 2.9% in the year ended in June, matching the smallest gain since the series began in 1981.

As long as wage gains remain modest, many investors believe, inflation will stay low--which could open the door to more interest rate cuts by the Federal Reserve Board.

“If you’re gunning along at a moderate growth rate and if you’re looking at no inflation, you buy bonds,” said Johan Christofferson, a managing director at CMA Ltd., a London-based hedge fund manager.

The Treasury sold new two-year notes Tuesday at an average yield of 5.955%, about as expected. A five-year note auction will be held today.

On Wall Street, another batch of better-than-expected second-quarter earnings reports from key companies also helped buoy the market.

“This is really an earnings-driven market,” one analyst said.

IBES, a Wall Street firm that tracks corporate earnings, said that of the 293 companies in the Standard & Poor’s 500 index that have reported quarterly results so far, 177 have posted better-than-expected earnings, 83 have reported surprise negative earnings and 33 were on target.

Among Tuesday’s highlights:

* Stocks reacting well to earnings reports included Goodyear, up 1 1/4 to 44; American Express, up 1 3/4 to 37 7/8; Boeing, up 2 to 66, and UAL, parent of United Airlines, up 4 to 149 1/2.

* Technology stocks continued to rebound from last week’s profit taking. IBM rose 7/8 to 108 3/8 after topping 110 intra-day for the first time in four years.

Other tech winners included Cadence Design, up 2 3/4 to 38 1/4; Hewlett-Packard, up 1 1/4 to 79 5/8; Texas Instruments, up 2 1/8 to 155 1/8; Wyle Electronics, up 2 5/8 to 39 3/4, and Computer Sciences, up 2 5/8 to 58 1/4.

Also, Intel rose 1 3/4 to 69 after brokerage Oppenheimer & Co. upgraded the stock.

* Telecommunications shares advancing included America Online, up 2 1/4 to 52 1/4; 3Com, up 3 3/8 to 76, and Tellabs, up 1 1/2 to 46 1/4.

* Strong second-quarter results from Chubb and a few other U.S. insurers bolstered sentiment toward the group and drove their stock prices higher. Chubb was up 2 1/8 to 80 5/8, American International Group rose 2 1/2 to 110 and TIG Holdings was up 1 3/8 to 24 1/8.

* Many utility stocks advanced. Houston Industries added 1/2 to 43 3/4 and Pacific Gas & Electric gained 3/8 to 29 5/8. The Dow utility index added 1.58 points to 203.60.

In foreign trading, Tokyo’s Nikkei-225 index tumbled more than 2.5% to record its biggest loss in almost four months, as the dollar’s weakness sparked concern about profits at Japan’s exporters.

The Nikkei fell 443.1 points, or 2.7%, to 16,148.40.

Mexico City’s Bolsa index fell 29.99 points to 2,455.31 in profit taking.

In U.S. commodities trading, corn and soybean prices rebounded strongly as another heat wave threatened the Midwest, while wheat prices retreated after a nearly uninterrupted rise on shrinking supplies.

Elsewhere, lumber prices fell sharply, while coffee prices edged up as an important meeting of coffee-growing countries got under way.

Renewed concerns about hot weather--with some meteorologists anticipating temperatures near 100 degrees by the weekend--drove up corn and soybean prices.

“They’re worried about the high-pressure dome coming in late this week, and that supported the market,” said Vic Lespinasse of Dean Witter Reynolds.

August soybeans rose 4.75 cents to $6.30 1/4 a bushel and September corn gained 3 cents to $2.96.