Stocks rallied Tuesday, reversing Monday's slide as bond yields fell.
A slew of upbeat corporate earnings reports and a stronger U.S. dollar also played a role in the day's action. Blue-chip stocks gained the most, compensating for a retreat on Monday fueled by currency worries and roiled overseas markets.
The Dow Jones industrial average rose 28.18 points to end at 4,783.66.
Declining issues outnumbered advancers by about 10 to 9 on the New York Stock Exchange.
Big Board volume stood at 415.45 million shares as of 4 p.m., up from 329.72 million for the previous session.
Broad market indexes posted weaker gains. The NYSE composite index rose 0.58 point to 312.90. The Standard & Poor's 500-stock index rose 2 points to 587.06.
The Nasdaq composite index was up 2.32 points at 1,039.24. The American Stock Exchange's market value index slipped 0.25 point to 524.91.
With no economic reports out Tuesday, investors focused on the bond market, a steadier U.S. dollar and a number of positive earnings reports, analysts said.
"The bond market is very strong, reviving hopes for a cut in interest rates," said Michael Metz, investment strategist at Oppenheimer & Co. in New York. "That's what's fueling the market."
The price of the Treasury's main 30-year bond closed up 1 1/16 point or $10.63 per $1,000 invested, following a well-received auction of new short-term securities. Its yield, which moves in the opposite direction, fell to 6.32% from 6.39% Monday.
Bond prices started out the day on a positive note after Federal Reserve Board Vice Chairman Alan Blinder said the economy appears headed for a so-called soft landing and indicated the Fed could cut interest rates.
Lower rates reduce corporate borrowing costs. But interest-rate sensitive stocks such as those of banks and insurance companies did not benefit from talk of a rate cut. Instead, investors seemed to focus on how these companies may fare in a slower U.S. economy.
"The fear is that the economy will be too slow to fuel any improvement in corporate profitability," Metz said.
In Tuesday's auction, yields on two-year Treasury notes fell to the lowest level in four months. The high yield was 5.71%, down from 5.86% at the last auction, Sept. 26. It was the lowest rate since two-year notes sold for 5.69% on June 26.
The notes will carry a coupon interest rate of 5.625%, with each $10,000 in face value selling for $9,985.10.
A total of $17.76 billion in notes were sold out of bids totaling $47.5 billion.
The dollar ended higher against the German mark and the Japanese yen. In late New York trading, the dollar ended at 1.3940 marks, up from its two-month low of 1.3865 reached late Monday. It also stood at 100.45 yen, up from 99.85 on Monday.
Among Tuesday's highlights:
* Bank and insurance stocks were lower. Citicorp was down 1 1/8 at 66 1/4, and Chemical Banking fell 2 3/8 to 57.
Insurer American General was off 3 5/8 at 35 3/8 after reporting a 14% drop in consumer finance earnings.
* Other economically sensitive stocks were unscathed. Transportation stocks were higher, boosted by higher earnings reports at Burlington Northern, which rose 5 7/8 to 82 3/4. Third-quarter profit at UAL, the parent of United Airlines, was nearly triple compared to a year ago. Its shares were up 5 3/4 to 176 1/2.
* Alcoa was up 2 to 50 3/8, Caterpillar rose 1 1/2 to 54 3/8 and Procter & Gamble was up 2 7/8 to 83 7/8.
* Many technology stocks were lower. Cirrus Logic fell 2 7/8 to 44 5/8, and Dell Computer dropped 3 5/8 to 91 5/8. But Digital Equipment rose 1 to 53 1/2 after it reported profit was slightly above expectations.
* New issue Gucci surged to 26 3/4, higher than the initial public offering price of 22 for the clothing company. Another new issue, Intimate Brands, parent company of lingerie retailer Victoria's Secret, priced at 17, ended at 17 5/8 and topped the list of most actively traded NYSE stocks. It was expected to trade at between 14 and 17.
In commodities trading, oil and oil product prices rose for the third consecutive day, as traders covered short positions and anticipated a drawdown in oil and gasoline supplies.
After the close of trading, the American Petroleum Institute reported crude oil stocks rose 736,000 barrels to 300.95 million barrels. Gasoline stocks also rose around 1% to 198.38 million barrels.
Light sweet crude oil for December delivery settled at $17.32 a barrel, up 11 cents, at the New York Mercantile Exchange.