Stocks Stage a Rebound Despite Higher Bond Yields

The stock market rallied modestly Monday after three days of losses, as investors chased after issues that should benefit from a stronger economy.

But smaller stocks overall were mostly lower, as bond yields continued to rise.

The Dow Jones industrial average gained 41.18 points to 6,918.92, despite being weighed down by a plunge in AT&T; shares, after the company warned of intensifying competition.

The Dow’s bounce up followed three losing sessions that had shaved 160 points from the index, after Federal Reserve Board Chairman Alan Greenspan warned last Wednesday of possible “excessive optimism” in the stock market.

In the broad market the Nasdaq composite index of mostly smaller stocks added 2.18 points to 1,311.18, as some technology issues rebounded.

But losers outnumbered winners by 22 to 18 on Nasdaq. On the New York Stock Exchange winners had just a tiny edge over losers.

Stocks were pressured by a weak bond market, where yields rose in the wake of stronger economic data.

The National Assn. of Purchasing Management reported that the nation’s manufacturing economy grew faster than expected in February.

The Commerce Department, meanwhile, reported that consumer spending jumped 0.7% in January, outpacing a 0.3% gain in incomes. Analysts had predicted spending growth of just 0.5%.

The Fed’s Greenspan had warned last week that the central bank could be forced to raise interest rates if it sees the economy accelerate. With those words still fresh in bond traders’ minds, Monday’s economic data sent yields up.

The yield on the bellwether 30-year Treasury bond rose to 6.83% from 6.80% on Friday, after rising as high as 6.86% during trading.

Given the continuing rise in bond yields, some analysts said stocks’ ability to rebound Monday was encouraging.

“You had two major negatives [higher yields and AT&T;’s slide] and the market was still able to basically reverse course,” said Peter Cardillo, director of research at Westfalia Investments.

But Joseph Barthel, chief investment strategist at Fahnestock & Co., argued that “it’s going to be a while before stocks regain their luster.”

Analysts noted that Greenspan will speak publicly again this week: He goes before the House Banking Committee on Wednesday.

And on Friday the government will report on employment trends in February, a key gauge of economic activity.

Among Monday’s highlights:

* Industrial issues leading the market higher on optimism about the economy included DuPont, up 4 1/8 to 111 3/8; GM, up 1 3/8 to 59 1/4; Alcoa, up 1 to 72 1/4; Cummins Engine, up 2 1/4 to 52 7/8; and Monsanto, up 1 1/4 to 37 5/8.

* Computer industry bellwethers led the tech rebound. Intel gained 4 to 145 7/8, Dell Computer rose 1 1/2 to 72 5/8, Microsoft advanced 2 to 99 1/2 and IBM improved 1 3/8 to 145 1/8.

* Conrail surged 7 1/8 to 111 5/8 as expectation mounted that a four-month takeover battle for control between CSX and Norfolk Southern was nearing an end. Conrail’s board met Monday to discuss the company’s options. CSX jumped 2 7/8 to 49 and Norfolk Southern rose 2 3/4 to 93 7/8.

* Many airline issues--also sensitive to the economy’s health--were sharply higher. Delta rose 1 3/4 to 82 1/4 and AMR, parent of American, surged 2 to 80 3/4.

* Some bank stocks rebounded, including Wells Fargo, up 5 1/4 to 309 1/2, and Wachovia, up 1 1/8 to 62.

* AT&T; tumbled 3 to 36 7/8 after the firm’s new president predicted that increased costs and long-distance business rivalry would depress already sluggish profits this year.

* Dow Jones jumped 1 5/8 to 41 7/8 on word that a member of the controlling family wants a new chief executive, and on a report that General Electric might want to buy a stake in the company.

* Israel’s VocalTec surged 2 1/4 to 8 3/4 after it said it signed a memorandum of understanding with Motorola to license and distribute software for transmitting voice communications over the Internet. Motorola lost 1/4 to 55 3/4.

* BHC Financial soared 11 7/8 to 31 7/8 after the company agreed to be acquired by Fiserv, which climbed 3 7/8 to 36 5/8.

* Cor Therapeutics slid 2 15/16 to 9 3/8 after a Food and Drug Administration advisory panel recommended against approving intrifiban, a rattlesnake venom derivative the company hoped to market for treating some heart conditions.