Stocks Rise as Yields Stabilize; Grains Tumble

The stock market advanced Tuesday after two losing sessions, as bonds stabilized and grain prices slumped.

The Dow Jones industrial average rose 41.00 points to 5,665.71, its biggest advance in nearly two weeks. But the index is still more than 110 points shy of its record set May 22.

In the broad market, most key indexes rose, and winners topped losers on the New York Stock Exchange and on the Nasdaq market of mostly smaller stocks.

The Nasdaq composite index gained 4.95 points to 1,243.68; it is just slightly below its record high of 1,248.65.

Short- and long-term interest rates, which have been rising in recent weeks on concerns that the Federal Reserve Board may soon tighten credit to slow the economy, held mostly steady, giving stock investors an excuse to buy, analysts said.

The yield on the benchmark 30-year Treasury bond closed at 7%, off slightly from Monday’s 7.01%.

Still, “we haven’t really seen a weak piece of [economic] data that would make people comfortable buying the market,” said John Burgess, who helps manage $70 billion of bonds at Bankers Trust Global Asset Management in New York. “Inflation is a potential problem.”

Many bond market participants are anxiously awaiting Friday’s government report on May employment. That will give one of the first important readings on the economy’s pace last month.

Economic reports in recent days have been “just another part of a mixed-signal bag of data that is difficult to divine,” said Alan Ackerman, senior vice president at Fahnestock & Co.

Many Wall Streeters believe the stock market will have a tough time getting a major rally going soon if interest rates continue to rise.

“The stock market clearly gets very sensitive to long bond yields over 7%,” said Gail Dudack, chief investment strategist at UBS Securities.

In good news for stock and bond markets Tuesday, grain prices continued to retreat as Midwest weather remained favorable for crops. Wheat and corn prices tumbled, helping to pull the Commodity Research Bureau index of key commodity prices down 1.69 points to 250.05.

Gold and silver prices also fell, as tumbling grain prices lessened inflation concerns. June gold futures on the Comex lost $2.70 to $387.50 an ounce.

Meanwhile, the dollar rose against the Japanese yen, briefly breaking above 109 yen, but it gave up some of the gains while remaining at 28-month highs.

Among Tuesday’s highlights:

* Retailing stocks performed particularly well in advance of this week’s reports on May sales. Sears was up 1 1/8 to 51 3/8, Woolworth gained 1 1/8 to 22 and J.C. Penney jumped 1 1/2 to 52 7/8.

* Bank stocks were broadly higher after a favorable Supreme Court ruling on credit card fees. NationsBank jumped 2 3/8 to 84, BankAmerica gained 1 1/2 to 76 1/2 and Citicorp added 1 1/8 to 85 1/4.

* Northrop Grumman surged 2 1/2 to 65 3/4 after reiterating its desire to further reduce debt through divestitures.

* Allstate gained 2 3/4 to 45 7/8 on news that 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.

* Paper giant Champion International added 1 3/8 to 45 1/2 after news of the retirement of its two top executives.

* Sizzler International fell 1 to 2 7/8 on the NYSE, as trading resumed following the restaurant chain’s surprise bankruptcy filing Sunday. Although the firm expects to be immediately profitable if the bankruptcy allows it to exit unfavorable leases, analysts said some institutional owners of the stock were forced to sell because their charters prevent them from holding bankrupt stocks.