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Stocks Show Some Resilience

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From Times Staff and Wire Reports

The stock market continued to show resilience Monday, as most major indexes edged up despite a jump in oil prices and higher Treasury bond yields.

As in recent weeks, many investors seemed to focus more on upbeat economic data than on the negative effects of oil and rates.

Rising stocks outnumbered losers by about 5 to 4 on the New York Stock Exchange and on Nasdaq.

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The technology-dominated Nasdaq composite index gained 10.55 points, or 0.5%, to 2,195.38, while the blue-chip Standard & Poor’s 500 inched up 1.17 points, or 0.1%, to 1,235.35. Both indexes hit four-year highs last week.

The NYSE composite added 25.44 points, or 0.3%, to 7,502.10. It had closed at a record high on Thursday before pulling back modestly on Friday.

The Dow Jones industrial average was one of the day’s few losers among key indexes. It dipped 17.76 points, or 0.2%, to 10,623.15.

Near-term crude oil futures in New York jumped $1 to a record $61.57 a barrel after the death of Saudi Arabia’s King Fahd boosted concerns about global oil supplies.

In the bond market, the 10-year Treasury note yield ended at 4.31%, up from 4.28% on Friday and the highest since April 14. The two-year T-note rose to a four-year high of 4.03% from 4.01% on Friday.

Some investors sold bonds after the Institute for Supply Management said its index of U.S. manufacturing activity rose to 56.6 in July from 53.8 in June. The increase was bigger than expected and pointed to growing strength in the industrial sector.

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That news helped underpin stocks, but it also made it more likely that the Federal Reserve would continue to lift short-term interest rates, analysts said. The Fed meets Aug. 9 and is expected to raise its benchmark rate to 3.5% from 3.25%.

The bond market “has not fully priced in the risk to the upside” in terms of yields, said Don Alexander, a fixed-income strategist in New York at Citibank Private Bank. He said the yield on the 10-year T-note would probably rise to 4.45% before year’s end.

Although Treasury rates are rising, the yield on an index of corporate junk bonds in recent days has fallen below 7% for the first time since March.

The index of 100 junk issues tracked by KDP Investment Advisors ended at 6.98% on Monday. It had surged as high as 8.07% in May amid worries about a slowdown in the economy.

Now, the improving economic picture is brightening the picture for junk bonds and other high-risk securities, analysts say. Robust second-quarter earnings reports from many companies also have bolstered demand for stocks and for junk bonds.

“All the economic data looks pretty darn good across the board,” said Jay Mueller, who oversees about $4 billion in debt at Wells Capital Management in Menomonee Falls, Wis.

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The stock market’s rally in July was broad-based. The Dow and the S&P; 500 both rose 3.6%; the Nasdaq composite jumped 6.2%.

The average diversified U.S. stock mutual fund rose 4.5% in July, according to fund tracker Lipper Inc. Year to date, the average fund is up 4.2%, and the 12-month average gain is 17.9%.

But the market faces a big test in August and September, which historically have comprised the weakest two-month stretch of the year for equities, according to the Stock Trader’s Almanac.

Among Monday’s market highlights:

* Energy stocks were mostly higher with oil prices. Sunoco jumped $2.37 to $128.10, Burlington Resources gained 92 cents to $65.03 and Exxon Mobil was up 48 cents to $59.23.

* Investors took profits in utilities after the Dow utility-stock index hit a high Friday. The index fell 4.73 points, or 1.2%, to 392.56.

* The S&P; 600 small-stock index continued its winning ways, adding 0.5% to a record high of 354.56. It is up 7.8% year to date, compared with a 1.9% rise for the S&P; 500.

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* The Nasdaq index got a boost from gains in the biotech sector. Amgen rose $1.86 to $81.63, Gilead Sciences jumped $1.07 to $45.88 and NitroMed rallied 92 cents to $24.16.

* Mining stocks were helped as copper prices hit record highs amid tight global supplies. Winners included Phelps Dodge, up $1.55 to $108; Rio Tinto, up $1.25 to $133.90; and Inco, up 86 cents to $41.84.

* EBay gained $1.83 to $43.61, its highest since January. Smith Barney analyst Mark Mahaney upgraded the shares to “buy” from “hold,” citing rising revenue per transaction on the auction website.

* RadioShack soared $3.31 to $26.78. The electronics chain agreed to sell products and services of Cingular Wireless, the largest mobile-phone carrier, while cutting ties with Verizon.

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