Stocks rallied Thursday as Wall Street belatedly cheered the Federal Reserve's latest interest rate cut and as an appeals court reversed the breakup of Microsoft.
But the market sold off late in the day, trimming key indexes' gains.
In the bond market, yields jumped after the government said weekly claims for jobless benefits fell--suggesting the economy may be stabilizing.
Though stocks showed little change Wednesday after the Fed cut its key interest rate for a sixth time this year, investors came to work Thursday with a more upbeat view, analysts said.
The rate cut "gives us a glimmer of hope" that corporate profits will rebound later this year, said Terry McLaughlin, chief investment officer of Ashland Management.
Though earnings have been dismal so far this year, "There's been enough bad news out there" already reflected in stock prices, he said.
The Microsoft court ruling helped stoke the market at midday. The decision "reduces government tinkering with the economy, so that's bullish for the equity markets," said John Ryding, economist at Bear Stearns.
Even so, stock prices pulled back in the afternoon. Nasdaq had been up as much as 4% at its midday peak. Winners still topped losers by 3 to 2 on the New York Stock Exchange and by 23 to 14 on Nasdaq. Trading was active.
With the first half of the year ending today for investors, most major stock indexes remain in the red despite the second-quarter rebound. The Dow is down 2.1% for the year, Nasdaq is down 14% and the Standard & Poor's 500 index is off 7.1%.
The government's report Thursday on lower jobless benefit claims may have given more investors reason to trust in an economic recovery sooner than later.
But the data triggered a jump in Treasury bond yields for the same reason. Also, the Fed on Thursday reported the minutes of its May 15 meeting, which revealed that some Fed policymakers were fearful that the central bank's rate-cutting campaign was too aggressive and risked fueling inflation later.
The Fed's meeting minutes and shift to a quarter-point rate cut Wednesday after five half-point cuts added to a sense that the central bank may be finished easing credit.
That sent shorter-term Treasury yields sharply higher Thursday. The yield on the two-year T-note rose to 4.24% from 4.12% on Wednesday. Longer-term yields also rose, with the 10-year T-note ending at 5.33%, up from 5.24%.
Among Thursday's highlights:
* Microsoft finished up modestly, rising $1.60 to $72.74 after a three-hour trading halt.
Many other tech shares rallied. IBM gained $1.58 to $115.10, Oracle jumped $1.14 to $19.18, Sun Microsystems rose 65 cents to $15.60, Qlogic soared $5.54 to $63.24 and EBay rose $1.36 to $69.96.
* Retail stocks rose after recent profit-taking. Sears gained $1.22 to $42, Kohl's surged $1.59 to $63.11 and Federated Department Stores rose $1.78 to $42.92. Guitar Center leaped $1.73 to $19.87.
* Energy stocks continued to slide as oil prices dipped again. Halliburton fell $1.48 to $37.17, Apache lost $2.10 to $48.40 and Noble Affiliates dropped $1.62 to $34.37.
But lower energy costs helped boost transportation issues. The Dow transports index jumped 2.4%.
* The euro currency tumbled, posting its biggest drop in almost six months against the dollar, after French business confidence declined to its lowest level in two years--fueling more concern that Europe's economy is faltering. The euro ended at 84.5 U.S. cents, down from 86.1 cents Wednesday.
Market Roundup, C7-8