FINANCIAL MARKETS : Stocks Lift From Blahs in Big Rally

Wall Street went back to work on Tuesday in an apparently very good mood, sending stocks up sharply and bond yields down.

Several key stock indexes zoomed to record highs as long-term bond yields dropped to seven-week lows.

Led by strong investor demand for technology and industrial shares, the buying that lifted Wall Street out of its late-summer lethargy started slowly and gradually gathered momentum as the session progressed.

The Dow Jones industrial average ended up 22.54 points at 4,670.08, adding to Friday’s 36.98-point surge.

But the blue-chip average remained below its all-time high of 4,736.29 set on July 17.

In contrast, the broad market showed remarkable strength. Winners topped losers by 15 to 8 on the NYSE in active trading.

The Standard & Poor’s 500 index shot up 5.33 points to a record 569.17, surpassing the old peak of 565.22 set July 27.

Likewise, the NYSE composite and American Stock Exchange market value indexes also hit records.

But the hottest sector was once again technology. Rocketing prices of key tech issues sent the Nasdaq composite index up 19.83 points or 2% to a record 1,039.30, topping its previous peak of 1,031.29 reached Aug. 18.

Ricky Harrington, analyst at brokerage Interstate/Johnson Lane, said tech issues overcame concerns that surfaced last week when reports indicated that the huge Magellan Fund, Fidelity’s flagship, may have been paring some of its tech holdings.

“The market weathered that storm, and the technology sector has regained its leadership position,” he said.

Semiconductor shares were among those investors favored. Intel jumped 2 13/16 to 63 11/16 as more than 7.4 million shares changed hands, making it Nasdaq’s second-most-active issue.

On the Big Board, Micron Technology jumped 5 to 81 3/8, Motorola rose 3 1/4 to 77 3/4 and Texas Instruments spurted 4 1/4 to 76 3/4.

Stocks were egged on by another decline in long-term bond yields.

The bond market rallied as more investors concluded that economic growth is likely to remain slow and steady, and that the Federal Reserve Board has room to cut short-term rates further, analysts said.

The yield on the 30-year Treasury bond fell to a seven-week low of 6.57% from 6.61% on Friday.

Some Wall Streeters say investors’ appetite for bonds also reflects belief that the federal government is on track to a balanced budget sometime early in the next century. In theory, at least, a balanced budget will mean less federal borrowing and thus less upward pressure on interest rates in the long run.

That sentiment also may be helping industrial stocks, which rallied briskly on Tuesday, analysts noted. Lower interest rates could help sustain the economy’s expansion, which would be bullish for industrial companies’ earnings.

Industrial gainers on Tuesday included the auto stocks. The Big Three automobile manufacturers all were active on the NYSE, with Ford up 1 1/8 to 32 3/8, Chrysler up 2 1/2 to 57 1/8 and General Motors up 3/4 to 49 1/4.

Airline stocks also shot up, on news of USAir’s return to profitability.

Meanwhile, banking stocks got fresh attention as investors bet on continuing consolidation in the industry. News that NationsBank intends to take over Bank South for about $1.6 billion in stock, or $27 a share, renewed the merger speculation. NationsBank slipped 5/8 to 60 7/8 on the NYSE, and Bank South rose 2 3/16 to 25 7/16. That stock led the Nasdaq volume list.

Elsewhere, the dollar ended lower against the Japanese yen, edging down to 97.50 from 97.55 late Friday, on speculation that the Japanese central bank would soon lower interest rates. The dollar drifted lower against the German mark as political and budgetary problems in Spain, Italy and France caused investors to seek refuge in German assets. In late New York trading, the dollar was at 1.4622 German marks, down from Friday’s 1.4630 marks.

Oil prices shot up on fears that Hurricane Luis might damage oil facilities in the Caribbean region, in particular a large refinery in St. Croix, near Puerto Rico, that was damaged six years ago by Hurricane Hugo.

October gasoline surged 1.98 cents to 56.23 cents a gallon at the New York Mercantile Exchange. The jump in gasoline prices helped lift October crude oil 54 cents to $18.58 a barrel. October heating oil rose 1.54 cents to 52.97 cents a gallon.