NEW YORK -- Stocks closed higher yesterday after a late surge that took the Dow Jones industrial average to a session high and reversed losses in the over-the-counter market.
Stock prices were mixed most of the day amid concern surrounding two key inflation reports due for release starting today, and the Treasury's $35 million quarterly sale of notes and bonds this week.
The Dow jumped 25.47, to close at the day's high of 3,468.75, putting it 0.3 percent below its all-time high of 3,478.61, set April 16. The Dow's rise was led by Minnesota Mining & Manufacturing and J.P. Morgan.
"I think everybody expects inflation to stay under control," said Barry Berman, head trader at Robert W. Baird. "The stock market can tolerate slower economic growth than it would like as long as interest rates stay down."
"Right now, it looks like there's a lot of cash around, and even though the economy is weakening, people are optimistic the Federal Reserve will do something about it if it doesn't come back," he said.
Broader market indexes also closed higher. The Standard & Poor's 500 Index rose 1.56, to 444.36, while the Nasdaq Combined Composite Index climbed 0.24, to 683.06, after being lower most of the session. The American Stock Exchange Market Value Index ended up 0.56, to a record high of 427.25, surpassing the old high of 426.95 set Thursday.
Trading was slower than usual, with about 221 million shares changing hands on the New York Stock Exchange. The sluggish trading exaggerated price movements, traders said.
Advancing common stocks overtook decliners by 9-to-7.
The late surge in stocks lifted the market after the Treasury's sale of three-year notes. Treasury bond prices dropped, resulting in higheryields, even after the $16 billion sale of notes attracted more demand than expected.
The benchmark 30-year bond, which fell about 1/8 after the auction, was down less than 1/8 point in late trading. The yield was 6.81 percent, unchanged from late Monday.
Yesterday's auction kicked off the Treasury's three-day quarterly sale of notes and bonds. The Treasury will sell $10.75 billion in 10-year notes today and $8.25 billion in 30-year bonds tomorrow. The average yield for yesterday's three-year note auction was 4.27 percent, in line with expectations.
The late surge aside, "the stock market's in a holding pattern until there's a reason to do something aggressive," specifically renewed confidence in the U.S. economy, said Michael Metz, chief investment officer at Oppenheimer & Co.
As a result, investors spent most of the day loath to commit more money before this week's inflation reports, analysts said.
The Labor Department is slated to release April figures on producer prices today and consumer prices on Thursday.
"If the PPI and CPI figures are good, this might give a little push" to stocks, Mr. Metz said. "There's still a residual inflation scare from earlier this year."
Beverages, money-center and major regional banks, and telephone issues registered the biggest gains within the S&P; 500 industry groups. Tobacco, electrical equipment, and semiconductor stocks fell the most.
Philip Morris Cos., Spectrum Information Technologies Inc., Humana Inc., RJR Nabisco Holdings, and L.M. Ericsson were the most actively traded stocks.
Philip Morris fell $1.25, to $51.50. On Monday, the stock rose $1.75 after First Boston raised its rating to "strong buy," in the wake of price increases on deep-discount cigarettes.