A slight dip in interest rates inspired some bargain hunting in stocks Tuesday, lifting most indexes higher, but the tone of trading remained hesitant ahead of Friday’s key report on May employment.
The Dow Jones industrial average rose 41.00 points to 5,665.71, its biggest advance in nearly two weeks. But the barometer of 30 big U.S. companies, which has been pressured by investor concerns about inflation and interest rates, is still more than 110 points shy of the record set May 22.
Broad-market indexes were mostly positive as the market’s movements remained hinged to interest rates in the absence of any market-moving news or a more definitive indication of the economy stamina.
The yield on the benchmark 30-year Treasury bond closed at 7%, down from Monday’s 7.01%.
“The stock market clearly gets very sensitive to long bond yields over 7%,” said Gail Dudack, chief investment strategist at UBS Securities. “They fell below 7% in early trading and that was enough to get stocks moving.”
Advancing issues outnumbered decliners by a margin of 8 to 5 on the New York Stock Exchange.
NYSE volume totaled 384.48 million shares as of 4 p.m. That was up sharply from Monday’s relatively anemic 314.96 million, but it was the seventh straight session below 400 million, reflecting the growing uncertainty among market participants.
There was little reaction to a Commerce Department report that factory orders slipped 0.1% to $309.1 billion in April, the third drop in four months. The decline was less than most analysts had expected.
“It’s just another part of a mixed-signal bag of economic data that is difficult to divine,” said Alan Ackerman, senior vice president at Fahnestock & Co. “A sustained rally is unlikely as long as interest rates and inflation worries prevail.”
The NYSE’s composite index rose 2.53 points to 360.80 and the Standard & Poor’s 500-stock index rose 4.88 points to 672.56. The Nasdaq composite index rose 4.95 points to 1,243.68, but the American Stock Exchange’s market value index fell 1.27 points to 607.44.
“The bond and stock markets are imprisoned by this Friday’s employment number,” said Russ Labrasca, senior vice president at Sutro & Co. of San Francisco.
The markets have plunged on the strong employment picture depicted in the last three monthly readings. The implied increase in spending power has spurred worries that higher demand would translate into rapid inflation.
Meanwhile, the dollar rose against the Japanese yen Tuesday, briefly breaking above 109 yen, but it gave up some of the gains while remaining at 28-month highs.
By 4 p.m. in New York, the dollar was trading at 108.85 yen, compared with 108.37 late Monday. The dollar peaked Tuesday at 109.35 yen, the highest intraday level since Feb. 4, 1994. It traded at 1.5300 German marks late Tuesday, compared with 1.5279 on Monday.
Among Tuesday’s highlights:
* Retailing stocks performed particularly well in advance of this week’s reports on May sales. Sears, up 1 1/8 to 51 3/8, and Woolworth, up 1 1/8 to 22, were among the Dow average’s biggest gainers.
* Northrop Grumman rose 2 1/2 to 65 3/4 after reiterating its desire to further reduce debt with some divestitures.
* Allstate rose 2 3/4 to 45 7/8 on news it will reorganize its Florida property business based on new Florida laws in a bid to solve the company’s hurricane exposure problems in the state. Lehman upgraded Allstate’s price target.
* Champion added 1 3/8 to 45 1/2 after news of the retirement of its two top officials.
* Arrow International slumped 11 1/4 to 28 1/2 after forecasting that third-quarter sales would fall below expectations.
Overseas, Tokyo’s Nikkei stock average rose 1.2%, Frankfurt’s DAX index rose 0.5% and London’s FTSE-100 rose 0.4%.