NEW YORK -- Led by companies whose earnings benefit from lower interest rates, stocks finished mixed yesterday on the heels of Monday's powerful rally.
"Stocks are taking their cue from bonds, and bonds are a little weaker," said Steven Van Brunt, vice president of equity trading at Nikko Securities.
The Dow Jones industrial average rose 2.70 points, to close at 3,472.12, its second consecutive record, after having surged 64.84 points Monday. The Dow rose as high as 3,482.12 yesterday.
American Express rallied $1.25, to $28, a 52-week high. The rise was sparked by news that Primerica, parent of Smith Barney, Harris Upham & Co., was negotiating to buy the brokerage business of Shearson Lehman Bros. from American Express for about $1 billion. Primerica soared $4.75, to $44.75.
Monday's rally in stocks was touched off by declining interest rates and reports that Democrats had tentatively agreed to cut up to $55 billion more from federal spending over five years.
Yesterday, yields on long-term Treasury bonds rose, giving some investors reason to hold off making new bets on the direction of stock prices. Also, "people would like to see some confirmation of the [employment] numbers on Friday" before loading up on stocks, said Mr. Van Brunt at Nikko.
Stocks gained Friday after the Labor Department reported that employment growth in February was the strongest in four years.
Broad market measures finished mixed yesterday. The Standard & Poor's 500 index slipped 0.31 from Monday's record high, to 454.40. The NASDAQ Combined Composite climbed 1.73, to 688.96, below its record close of 708.85 set Feb. 4.
The American Stock Exchange Market Value index rose 2.29, to a record 419.02, surpassing the high of 418.99 set in February 1992.
The yield on the 30-year bond closed at 6.74 percent, up from Monday's 6.72 percent. Bond prices fell even though President Clinton was quoted as saying he was open to an additional $63 billion in spending cuts. The reaction suggested that bond prices have discounted the prospect of a lower federal budget deficit.
Advancing common stocks exceeded declining issues by about 8-to-7 on the New York Stock Exchange. Trading was active, with more than 290 million shares changing hands.
Share prices were little changed most of the day as investors' focus shifted to the Commerce Department's producer price report for February, due out Friday. "People are always looking for a reason to back off after a market rally," said Richard Meyer, head of institutional trading at Ladenburg, Thalmann & Co.
John Blair, head equity trader at NatWest Securities, said, "If the PPI comes out a little higher than expected, it might be a concern, but no one at this point is projecting an upturn in inflation."
Analysts estimate that wholesale prices rose 0.3 percent last month, and 0.2 percent excluding the volatile components of food and energy. In January, the PPI rose 0.2 percent, and 0.4 percent excluding food and energy.
Consumer prices for February will be reported March 17. Consumer prices rose an unexpectedly sharp 0.5 percent in January.
"You've got low interest rates, and even with inflation possibly creeping back in, the only place you can get big returns is the stock market," said Kenneth Ducey, director of trading at BT Brokerage.
Bank stocks continued to strengthen ahead of today's release of the Clinton administration's plan to ease the credit crunch.
The Clinton plan contains steps intended to revive the real estate markets, thereby making it easier for banks to lend to small businesses, the Wall Street Journal reported.