Stocks gain for 3rd straight session as interest-rate fears abate

NEW YORK — NEW YORK -- U.S. stocks climbed for a third straight day yesterday amid growing confidence that the moderate pace of economic growth will ease pressure on the Federal Reserve to raise interest rates soon.

The gain accelerated in the final half-hour, thanks to a late bout of computer-guided buy orders, traders said. Steelmakers were one of the day's biggest gainers, buoyed by expectations that industrywide price increases will boost profits.


Stocks were boosted by a Commerce Department report that gains in consumer spending and income lagged economists' expectations in June. It was the second report in two trading days indicating moderate growth with low inflation.

"There don't seem to be any signs of inflationary pressure on the consumption and income levels," said Dale Tills, manager of institutional equities trading at Charles Schwab & Co. in San Francisco.


The Dow Jones industrial average rose 33.67, to 3,798.17, extending Friday's 33.67-point surge and Thursday's 10.36-point advance.

The Standard & Poor's 500 index rose 2.75, to 461.01. Gains in telephone and electric utilities, automakers, high technology, paper and forest-products makers and steel companies offset losses in drugs, electrical equipment, semiconductor and retail stores.

The Nasdaq composite index rose 2.71, to 724.87, helped by gains in Microsoft Corp., U.S. Healthcare Inc., Cisco Systems Inc. and MCI Communications Corp.

Nasdaq trading was interrupted for about 40 minutes, starting about 1:20 p.m., because of a power disruption affecting the Nasdaq's main computer site in Trumbull, Conn.

It was the second time in two months that a computer malfunction delayed trading on the Nasdaq. On July 15, trading was delayed 2 1/2 hours because of a software glitch.

Seven stocks rose for every four that fell on the New York Stock Exchange. Trading was active, with 258.4 million shares changing hands on the Big Board.

The Commerce Department reports showed that consumer spending, an engine of economic growth, increased 0.4 percent during June, below what many economists had predicted. Moreover, Americans' income rose 0.1 percent in June, below the 0.2 percent estimate.

Yesterday's reports followed Friday's news that the U.S. gross domestic product -- the total output of goods and services -- expanded at an annual rate of 3.7 percent in the second quarter, below economists' estimates of 3.9 percent.


Taken together, the reports should delay a rate increase by the Fed, whose policy-making committee meets Aug. 16, traders said.

A rate increase "has been put off for a few months," said Edward Laux, head trader at Kidder, Peabody & Co.

United Technologies Corp. and General Motors Corp. led yesterday's rise in the Dow industrials.

United Technologies rallied $2.50, to $62.75, after the aerospace and defense company increased its quarterly common-stock dividend by 11 percent, to 50 cents a share, from 45 cents.

GM rose $1.50, to $52.875, in the wake of Thursday's news that the automaker's earnings more than doubled in the second quarter. GM rose $1.125 on Friday and 37.5 cents on Thursday.

Newbridge Networks Corp., the most actively traded U.S. stock, plunged $13.3125, to $28.625, after the maker of computer networking products said earnings for the fiscal first quarter that ended July 30 will be below analysts' estimates of 42 cents to 44 cents a share.


IDB Communications Group Inc. rose 12.5 cents, to $9.50, following a merger agreement with LDDS Communications Inc.