Stocks Rally as Bond Yields Approach Lows

Wall Street edged toward record levels on Wednesday as investors shrugged off a spate of warnings about technology-sector profits.

The Dow Jones industrial average rose 13.18 points to 8,032.01, erasing an earlier 57-point deficit, nearly a repeat performance of Tuesday, when the Dow advanced just before the close to eke out a 5-point gain.

Broader market indicators also rebounded, leaving some within striking distance of record highs set a few weeks before late October’s sell-off. Even with the ground regained since then, though, the Dow remains a few hundred points shy of its Aug. 6 peak of 8,259.31.

Surprisingly, the technology-heavy Nasdaq composite index, down as much as 15 points during the session, managed to post one of the day’s biggest gains amid a stream of discouraging profit forecasts. Several leading technology shares ended the day higher, and even 3Com, which had issued a strong warning of disappointing profit after trading ended Tuesday, recovered from a steep loss to close at $34.94, off just 38 cents. The Nasdaq composite index closed up 8.76 points at 1,615.13.

Helping break stocks’ fall was a rally in the bond market.

Analysts said bond traders were relieved by the latest economic data, which support the view that there’s little threat of rising inflation, and a speech by Federal Reserve Board Chairman Alan Greenspan. Low inflation makes fixed-income investments such as bonds more attractive.

Greenspan, steering clear of his usual fixation with inflationary pressures, devoted most of his comments Tuesday night to the financial crisis in Asia, suggesting that the turmoil will give way to a renewed era of prosperity if governments will implement swift reforms of the region’s shaky banking systems.

“Greenspan didn’t say anything, so no news is good news,” said Larry Rice, chief investment officer at Josephthal, Lyon & Ross.

Meanwhile, in another sign that the pace of economic growth may be such that inflation will remain low, the Commerce Department reported that the annual rate of sales of new homes slipped 1.7%.

The yield on the benchmark 30-year Treasury bond, a figure to which many types of loans are tied--hit 6.01%, down from Tuesday’s 6.03%.

On the New York Stock Exchange, advancing issues outnumbered decliners by a 9-7 margin in heavy trading.

The Standard & Poor’s 500-stock index rose 5.09 points to 976.77, less than 7 points from its Oct. 7 record finish of 983.12. The NYSE composite index rose 2.51 points to 510.15, about 4 points shy of record terrain. The Russell 2,000 index of smaller stocks rose 1.33 points to 433.81.

Among Wednesday’s highlights:

* Financial-sector shares, which have been weighed down of late by concerns over their exposure to the financial crises in Asia and Latin America, benefited from the drop in interest rates, which could help their domestic lending business.

American Express rose $2.06 to $85, and Travelers Group rose $1.63 to $56.50.

* Merck jumped $3.39 to $98 as the Dow’s biggest gainer, after the drug maker issued a confident earnings outlook.

* Despite the Nasdaq’s rebound, a number of computer networkers continued to tumble. Newbridge Networks fell $1.94 to $43.13, and Ascend Communications fell 13 cents to $23.63. However, Cisco Systems rebounded from early losses to close up 41 cents at $86.91.

Concern about slowing sales of networking equipment has hurt companies that make components for the gear. National Semiconductor fell $1.63 to $30.69, and Solectron tumbled $4.44 to $33.31.

The dollar slipped against the German mark overseas after Germany reported that its industrial output rose 1.8% in October, ending two months of declines and raising the odds that Germany might tighten credit to prevent a stronger economy from generating inflation.

The dollar ended at 1.7723 marks, down from 1.7770 on Tuesday.

Against the Japanese yen, the dollar began to sputter after its recent rally, as the International Monetary Fund unveiled a package of loans worth $55 billion to stabilize South Korea’s financial markets and economy.

The dollar firmed to 128.98 yen from 128.64 on Tuesday.

On overseas exchanges, London’s FTSE-100 closed at 4,970.7, down 6.9 points, or 0.14%. Tokyo’s 225-share Nikkei average closed at 16,585.51, down 324.78 points, or 1.92%. Hong Kong’s Hang Seng index closed at 11,207.58, down 8.77 points, or 0.08%.

Market Roundup, D9