Stocks gain, fueled by Treasury bond advances, retail sales report

NEW YORK — NEW YORK -- U.S. stocks rose yesterday, with shares of companies that do best in a growing economy posting the largest gains.

Modest advances by Treasury bonds and unexpectedly strong June sales reports by some retail chains helped stocks gain.


"Basic industry stocks appear to be doing a little bit better," said Thom Brown, managing director at Philadelphia-based Rutherford, Brown & Catherwood Inc. "The economy is expanding at a more rapid clip than people believed possible even a few months ago."

The Dow Jones industrial average rose 13.92, to 3,688.42, its fourth straight gain, as General Motors Corp., Bethlehem Steel Corp., Boeing Co. and Philip Morris Cos. advanced. A round of computer-guided buy orders boosted prices at midday, adding more than seven points to the Dow industrials, according to Birinyi Associates.


Among broader market indexes, the Standard & Poor's 500 index rose 2.25, to 448.38, as automobile, retail, software, oil and electric utility stocks posted the largest gains.

The Nasdaq composite index rose 5.53, to 706.53, its first progress since June 30, helped by gains in Microsoft Corp., Intel Corp., Oracle Systems Corp., U.S. Healthcare Inc. and Tele-Communications Inc.

Almost four stocks rose for every three that declined on the New York Stock Exchange, where volume grew to 259.7 million shares from 236.2 million Wednesday.

Second-quarter profits at steel, aluminum and machinery companies "will be greater than many people think," said Lawrence Rice, chief market strategist at Josephthal Lyon & Ross.

Earnings are expected to grow by 13 percent in the second quarter compared with last year, "which really is reasonably good earning," said Melissa Brown, chief quantitative analyst at Prudential Securities.

Investors are looking to today's release of June's nonfarm employment statistics by the Labor Department to gauge the strength of the economy and decide if the Fed will raise rates to fight inflation.

"The Fed has a window to act" if the June employment report, or other indicators next week, show the economy growing fast enough to spur inflation, said Richard Ciardullo, head trader at Eagle Asset Management in St. Petersburg, Fla.

Yields on the benchmark 30-year Treasury bond closed at 7.61 percent, up from 7.59 yesterday after the Labor Department said initial jobless claims fell 21,000, to 332,000, last week, the lowest level in four months.


The dollar dropped about half a pfennig, to 1.5725 German marks, after Germany's central bank left interest rates unchanged at a council meeting yesterday, confirming expectations that the United States and Germany won't coordinate rate changes to support the dollar. The Japanese yen gained 0.20, to 98.80 to the dollar.

Retail stocks rallied after major companies reported strong sales last month. The sales are "a positive, and as long as it's not considered inflationary, it should have a positive effect" on the broader market, said Peter DaPuzzo, senior managing director at Cantor, Fitzgerald & Co.

Dayton-Hudson Corp. climbed $1.375, to $82.25; Wal-Mart gained 37.5 cents, to $24.25; Sears added 37.5 cents, to $47.875; Circuit City Stores Inc. advanced 37.5 cents, to $20.125; Sunglass Hut climbed $3, to $30.75; and Gymboree jumped $2.75, to $41.25.

Auto stocks surged one day after U.S. automakers said sales of cars and light trucks last month rose 6.6 percent. Sales "weren't as bad as some people had been anticipating," said Harvey Heinbach, analyst at Merrill Lynch & Co.