NEW YORK -- U.S. stocks rebounded yesterday from a two-session slide as weakness in the Treasury bond market prompted some investors to switch funds into stocks.
"Money continues to flow out of all types of savings accounts, including Treasury bonds, into the stock market," said John Conlon, managing director at Rothschild Inc.
The Dow Jones industrial average, which fell more than 50 points Thursday and Friday from the all-time high set last Wednesday, gained 14.59, to 3,442.41.
Prices advanced while investors showed concern about inflation. The Commodity Research Bureau's price index, a closely watched inflation indicator, rose to the highest level since last June. The Treasury's benchmark 30-year bond dropped 1/2 point, to yield 6.89 percent, up 3 basis points from Friday.
"People are definitely focusing on inflation, but the stock market is showing surprising resilience, especially when you see what's happening to the bond market," said Daniel Marciano, senior vice president in charge of trading at Dillon, Read.
"So far, the stock market isn't taking the bond market's sell-off seriously," said Jon Groveman, president of Ladenburg, Thalmann & Co. "Stocks will back off if bonds keep falling."
Advancing common stocks outnumbered declining issues by about9-to-7 on the New York Stock Exchange. Gains in bank, semiconductor and computer software stocks offset losses in the telephone, electric utility and international oil groups. Trading was the lightest in weeks, as a weekend blizzard that socked the Eastern Seaboard curtailed activity. About 195 million shares changed hands on the Big Board.
Standard & Poor's 500 Index gained 1.60, to 451.43. The NYSE Composite Index rose 0.81, to 248.97. The Nasdaq Combined Composite Index advanced 2.43, to 695.21. The American Stock Exchange Market Value Index rose 1.85 to 422.94.
Stocks probably will fall over the next several days as investors' concern about inflation builds, Dillon, Read's Mr. Marciano said.
The Labor Department is set to release February's consumer price index tomorrow. Economists estimate that consumer prices gained 0.3 percent last month, according to a survey by Bloomberg Business News. The government announced Friday that prices paid by wholesalers climbed 0.4 percent in February.
"The scare is that no more progress can be made in controlling inflation," said Thom Brown, managing director at Rutherford, Brown & Catherwood Inc. If that's the case, interest rates are going higher."