NEW YORK — NEW YORK -- U.S. stocks snapped a two-day slide yesterday, buoyed by expectations of strong corporate earnings. Stability in bonds and the dollar also helped stocks, traders said.
Friday's report of stronger-than-expected July job growth "underlines the solid momentum of the current economy," said Gail Dudack, market strategist at S. G. Warburg. "This is a good backdrop for earnings prospects for the second half of 1994."
Gains were limited by concern that this week's sale of $40.25 billion in Treasury securities will glut the market and drive bond yields higher, creating competition for stocks, traders said.
Anticipation of this week's inflation reports and next week's Federal Reserve policy meeting also limited the stock market's advance.
The Dow Jones industrial average climbed 6.79, to 3,753.81, recouping a bit of the past two sessions' 45.64-point loss.
Gains in International Paper Co., International Business Machines Corp. and Minnesota Mining & Manufacturing offset losses in Caterpillar Inc., American Express Co. and Union Carbide Corp.
The Standard & Poor's 500 index closed up 0.80, at 457.89, after dropping 4.37 during the past two days.
Computer systems, drugs and international oils were among the market's biggest gainers yesterday. General retail stores, health care and chemicals were among the largest decliners.
The Nasdaq composite index, which shed 6.21 points in the past four days, rose 1.80, to 720.47. Cisco Systems Inc., Microsoft Corp. and Nordstrom Inc. paced the rebound.
Nordstrom stock rallied $1.3125, to $43.5625. An analyst at Wertheim, Schroder & Co. raised his earnings estimates a day before the apparel retailer is expected to post second-quarter earnings of between 65 and 70 cents a share, up from 52 cents a year ago.
Ten stocks rose for every nine that fell on the New York Stock Exchange. Trading was sluggish because many people are on vacation this month. About 218 million shares changed hands on the Big Board, below the daily average of 260 million shares in the past three months.
Stocks rose as investors focused on the aspects of Friday's employment report that underscored the recovery's strength. The Labor Department reported businesses added 259,000 workers in July, more than the 205,000 that economists expected.
Stock investors also were encouraged by stability in the bond market, where prices rose as the dollar climbed to a six-week high against the yen amid optimism about progress in U.S.-Japan trade talks. The yield on the benchmark 30-year bond fell as low as 7.50 percent, down 5 basis points, after soaring 14 basis points on Friday's jobs report, its largest one-day loss in three months. The yield closed the day at 7.54.
This week's inflation reports come just before next Tuesday's meeting of the Federal Open Market Committee, when many expect the Fed will vote for higher rates, traders said. "The market's in a holding pattern" until then, said Richard Ciardullo, head trader at Eagle Asset Management Inc., which oversees about $6 billion.
Mesa Airlines Inc., Telmex, RJR Nabisco Holdings Inc., Cisco Systems Inc. and Compaq Computer Corp. were the most actively traded stocks on the U.S. composite list.
Mesa Airlines plunged $3.4375, to $6.5625. The commuter airline said fiscal third-quarter net income dropped to 20 cents a share from 25 cents a year ago.
British Airways PLC's American depositary receipts, each representing 10 common shares, fell $2.25, to $64.375. The airline, which owns 20 percent of USAir Group Inc., said its U.S. partner continued to be "severely affected" by competition.