Stock Rally Hits a Snag as Bond Buying Stalls

A stock market rally fizzled into a mixed showing Wednesday as the bond market lost some steam and investors secured some profits.

Technology shares temporarily boosted the market after another strong earnings reports by a leading computer industry name, but most broad indexes failed to push further into record territory.

In Tokyo, however, stocks surged as recent fears about tighter credit gave way to optimism about the market’s upward momentum. The Nikkei-225 average gained 754.92 points, or 3.54%, to 22,055.97.

On Wall Street, the Dow Jones industrial average rose just 0.73 point to 5,625.44 after posting a gain of almost 50 points earlier in the session.

On Tuesday, the barometer of 30 big U.S. companies broke above the 5,600 mark for the first time in four weeks, but the recent blue-chip rebound faltered Wednesday as bonds yields held their ground after inspiring the stock market with a steady decline in recent days.

The yield on the Treasury’s main 30-year bond rose to 6.85% from 6.84% late Tuesday.

Most broader indicators ended slightly lower after holding modest gains for most of the session.

The NYSE composite index rose 0.12 to 356.64, the index’s third consecutive record close. But the S&P; 500 fell 0.18 to 665.42, ending a two-day string of new highs. Both indexes, heavily weighted with large companies, have been rallying over the past week as a series of moderate readings on the economy calmed fears about inflation.

The more speculative sectors managed to hold some marginal gains, lifting the Russell 2000 list of smaller companies to its fourth straight record, but the Nasdaq market ended slightly lower, ending a three-session streak of new highs.

The Nasdaq composite index fell 0.93 to 1,233.56, and the Russell 2000 rose 0.65 to 358.11.

A report on industrial production helped undermine some of the recent enthusiasm in the bond market, analysts said.

The Federal Reserve reported that industrial output shot up 0.9% in April, rebounding from a March decline caused by an 18-day strike at General Motors. Excluding the auto sector, output at the nation’s factories, mines and utilities was unchanged, but the rebound was still larger than expected.

Among the market highlights:

* The technology sector was lifted by the latest in a series of strong profit reports that have helped dispel widespread fears of a computer industry slowdown. Dell Computer, up 2 3/8 at 49 3/8, exceeded many analyst estimates with Tuesday evening’s report of a 33% rise in first-quarter profits.

The news lifted other computer stocks. Compaq added 5/8 to 47 5/8, Hewlett-Packard rose 7/8 to 113 3/4, and IBM rose 3/8 to 109.

* ConAgra added 2 1/8 at 14 1/8 after announcing it will cut 6,500 jobs and close or reconfigure 29 plants in a restructuring.

* Los Angeles-based DMX lost 7-16 at 1 9-16 after the digital music programmer announced that because of its continuing losses, it will be delisted unless it can meet Nasdaq’s capital requirements. DMX said it has asked for an extension to comply with the requirements. Separately, DMX said Tele-Communications will boost its stake in the company to about 45% from 14% through a series of transactions. TCI gained 1-16 at 18 3/4 as its losses nearly doubled in the first quarter, but were in line with expectations.

Elsewhere in foreign markets, London’s FTSE 100 ended 16.5 points higher at 3,776.2. Mexico City stocks fell for a second day amid concern that a stronger peso might hurt earnings at the nation’s largest exporters. The Bolsa index fell 18.19 points, or 0.56%, to 3232.14.

Threats of trade sanctions by the United States and China against each other Wednesday pressured some commodity prices on fears that sales to China will be affected. But the overall effect on the market was muted and analysts said they expect a truce, not a trade war.

At the Chicago Board of Trade, July soybean oil closed down 0.21 cent per pound at 27.27 cents. Cotton, another big U.S. export to China, also felt some pressure from the talk of sanctions, but traders said most Chinese purchases for the near term had already been made. October cotton ended 0.02 lower at 82.38 cents per pound on the New York Cotton Exchange.