Stocks, taking their cue from lower bond yields, rallied in the final hour yesterday after having been little changed most of the day. The Dow Jones industrial average closed up 18.91, at 3,446.46.
Fresh reports that confirmed a slowdown in the economy, coupled with holidays in London and Tokyo, limited market activity. At the same time, the economic news triggered a slide in Treasury bond yields, helping to make equities more attractive.
"We were up or down a few points all day, and all of a sudden, the market just gunned it," said Edward Collins, executive vice president of trading at Daiwa Securities America. "What happened was as soon as the bond futures stopped trading, some buy orders kicked in," Mr. Collins said.
The computer-driven buy orders countered a dip caused by three Dow components, Aluminum Co. of America, Texaco Inc. and Westinghouse Electric Corp., going ex-dividend yesterday, according to Birinyi Associates. The combination of the three pared about 3.5 points from the average, according to Birinyi.
The benchmark 30-year bond gained 7/8 , to yield 6.86 percent, down 6 basis points from Friday.
Among broad market indexes, the Standard & Poor's 500 Index rose2.29, to 442.48. The Nasdaq Combined Composite Index climbed 5.29, to 666.71.
Yesterday's rally was merely a snapback from last week and doesn't dispel concern about the economy or lack of confidence in President Clinton's ability to grapple with domestic and international problems, traders and analysts said.
"It's not a very impressive rally," said Thomas Gallagher, managing director in charge of capital commitment at Oppenheimer & Co. "People were set up on Friday to have a bad Monday because of how the market turned down last week."
When stock prices began to recover from the day's lows, speculators who had sold borrowed stock in hopes of a decline scrambled to buy back shares, traders said.
"Right now, I think we're setting the stage for a quiet summer," said Richard Ciardullo, head of trading at Eagle Asset Management. "Nobody knows what's going to happen in Bosnia or Russia, the economy's so sluggish, and the Clinton administration is losing support more and more. I think portfolio managers are going to try to dodge some bullets and take an early vacation."
Trading was slower than usual, with about 220 million shares changing hands on the Big Board.