Dow Up 114 in Broad Rise; Yields Ease

Stocks surged Tuesday, led by technology shares, as some investors appeared to cheer the Federal Reserve Board’s decision to leave interest rates unchanged.

The settlement of the United Parcel Service of America strike also may have relieved worries about the economic effects a long strike would have had, experts said.

In a volatile session, the Dow industrials closed up 114.74 points, or 1.5%, at 7,918.10. Combined with Monday’s Dow gain of 108 points, the two-day advance nearly erased all of Friday’s 247-point plunge.

Tuesday’s advance was broad-based, with winners topping losers by 20 to 8 on the New York Stock Exchange and by 24 to 16 on Nasdaq.

Pumped up by tech stocks, the Nasdaq composite index rocketed 31.19 points, or 2%, to 1,600.71.

Although the Fed’s decision to leave rates alone was widely expected, it still served to remind investors that the economy remains in a good position, some analysts said.

“The Fed gave us great news” Tuesday, said Ed Yardeni, chief economist at Deutsche Morgan Grenfell. “I expect [stock] valuations to go up as interest rates come down. That will surprise a lot of people.”

Some economists believe that if inflation remains low, interest rates can decline over the next year even if the economy continues to grow.

But on Tuesday, the bond market seemed to take the Fed’s decision in stride. Yields were mostly unchanged, with the yield on the bellwether 30-year Treasury bond closing at 6.51%, down from 6.52% on Monday.

On Wall Street, analysts said Friday’s Dow tumble now appears to have been the final stage of a minor sell-off of key blue-chip stocks, rather than the start of something bigger.

“We had a selling climax on Friday, which is hard to identify except in hindsight,” said Alfred E. Goldman, market analyst at A.G. Edwards & Sons of St. Louis.

As for the UPS strike settlement, analysts said investors don’t appear to believe it heralds the start of a round of wage increases that could crimp corporate profits and lead to higher inflation in the economy.

For right now, the settlement is a positive for the market in that it removes the threat of a continuing interruption of business for many companies that ship products, said Peter Coolidge, managing director for equity trading at Brean Murray & Co. “The strike was so disruptive, it slowed down the economy,” he said. “This, I think, is a victory for the country.”

Among Tuesday’s highlights:

* Technology stocks sizzled as some money managers hunted for fast-growing companies with lower price-to-earnings ratios than many blue chips offer.

Intel jumped $3.69 to $97.91, Microsoft surged $4.94 to $138.81, IBM jumped $3.94 to $107.94 and Compaq gained $2.56 to $60.75.

Also, Dell Computer rose $2.31 to $84.69. After the market closed, the company reported better-than-expected earnings of 59 cents a share, up from 28 cents a year earlier.

Wall Street had expected 54 cents a share.

* Blue chips rebounding included American Express, up $2.31 to $82.81; Procter & Gamble, up $3.75 to $138.88; Gillette, up $2.69 to $85.75; and Warner-Lambert, up $4.63 to $135.06.

* Retailers gaining on strong earnings reports included Tiffany, up $2.50 to $43.25, and Home Depot, up $1.44 to $49.44.

* Industrial issues rising included Navistar, up $1.56 to $23.44; Cummins Engine, up $2.69 to $79.19; and Deere, up $1 to $56.50.

In currency trading, the dollar continued to rebound against the German mark, finishing at 1.8405 marks in New York, up from 1.8305 on Monday. The dollar also rose against the Japanese yen.