NEW YORK — NEW YORK -- U.S. stocks closed mixed yesterday as concern about higher interest rates eased when the bond market pared its losses. Trading was slow as many investors extended their Memorial Day weekend.
Losses in drug, entertainment, soft drink beverage and electric utility stocks offset gains in electrical equipment, semiconductor, money-center banks, gold and food issues.
Stocks are "just getting over the weakness in the bond market," which is likely to persist in anticipation of a strong employment report on Friday, said Jim Benning, trader at BT Brokerage, a unit of Bankers Trust New York Corp.
"The economy is definitely picking up," fueling concern that inflation is accelerating and interest rates will climb, Mr. Benning said.
The Dow Jones industrial average rose 1.23, to 3,758.37, helped by two rounds of computer-guided buy orders, after falling as much as 15.08. Yields on the government's benchmark 30-year Treasury bond rose to 7.43 percent yesterday from 7.39 percent Friday, after rising as high as 7.47 percent. American Express Co., McDonald's Corp. and J. P. Morgan & Co. posted the largest gains.
Among broader market indexes, the Standard & Poor's 500 fell 0.81, to 456.52, while the Nasdaq composite index rose 2.05, to 735.19, after earlier falling 2.64. Microsoft Corp., Intel Corp., U.S. Healthcare Inc. and American Power Conversion Corp. contributed to the Nasdaq advance.
The Russell 2000 Index fell 0.18, to 249.28, and the American Stock Exchange market value index dropped 0.49, to 440.45.
Almost four stocks fell for every three that rose on the New York Stock Exchange, where trading rose to 215.8 million shares from 186.42 million Friday.
Rising commodity prices raised concern that the rate of inflation is about to quicken, said Christine Callies, a market analyst at Brown Bros. Harriman.
The Commodity Research Bureau index of 21 key commodity prices, regarded as an indication of future inflation, jumped 4.57, to 235.45. Gold, often used as a hedge against inflation, gained $2.30, after rising as much as $3.70 for delivery in August, to $390.00 an ounce.
Gold stocks rallied as bullion prices climbed.
Some analysts say the Federal Reserve's four increases in interest rates this year won't be enough to contain commodity price increases. Bear, Stearns & Co. economists, led by former Federal Reserve governor Wayne Angell, said yesterday that the Fed may raise rates for the fifth time this year at the July meeting of the Federal Open Markets Committee, spurred by a 4.6 percent growth in gross domestic product in the second quarter.
Microsoft, Blockbuster Entertainment Corp., Lehman Brothers Holdings Inc., Telefonos de Mexico and Philip Morris Cos. were the most actively traded stocks.