NEW YORK -- U.S. stocks closed mixed yesterday as concern lingered that the Federal Reserve's policy panel might raise interest rates at its Sept. 27 meeting.
"With the recent inflation news, it's more of a likelihood they'll raise rates in September than in November," said Peter Canoni, managing director in equity investments at Aeltus Investment management, a unit of Aetna Life & Casualty Co. that oversees about $4.5 billion in stocks.
The Dow Jones industrial average rose 3.37, to 3,936.72, recouping a fraction of Friday's 20.53-point loss. Computer-guided "sell" orders helped knock the average from an early gain of 19.85 points, according to Birinyi Associates Inc. International Paper Co., Coca-Cola Co. and American Express Co. led the Dow industrials' gain.
Twelve stocks fell for every nine that rose on the New York Stock Exchange.
"The underlying market is not doing as well as the Dow," said Richard Ciardullo, head trader at Eagle Asset Management Inc., which oversees about $6 billion. "There's a lot of negative sentiment."
The Standard & Poor's 500 index fell 0.34, to 470.85, after rising as much as 1.96. The index fell 3.62 on Friday.
The Nasdaq composite index slipped 1.19, to 776.72, after rising as much as 1.18. On Friday, the index slipped 0.75 point.
Expectations for a rate increase grew Friday, when the Fed released a report showing the nation's factories running closer to full steam than they have in five years, heightening concern over inflation. U.S. factories, mines and utilities operated at 84.7 percent of capacity in August, the highest since March 1989, while industrial output rose for the 15th straight month.
Steady bond prices helped insulate the stock market from steeper losses yesterday, traders said. The yield on the benchmark 30 1/4 -year Treasury bond retreated as low as 7.75 percent, down from 7.77 percent Friday, when the Fed's plant-use report sent yields soaring 13 basis points. The yield ended the day yesterday at 7.76 percent.
"Rising capacity use, higher commodity prices and increasing tightness in local labor markets make it increasingly likely that the Fed will resume raising interest rates in the next month," S. G. Warburg economist Joseph Liro said yesterday.
Looking ahead, the Commerce Department will release figures on July merchandise trade today and August housing starts tomorrow.
Some traders don't think a rate increase is imminent. "I think the real reason they raised rates 50 basis points in August was to buy themselves some time," said Todd Clark, senior director in equity trading at Mabon Securities Corp.
Coca-Cola closed up $1.125, at $48.875, after setting a record high of $49.375 earlier yesterday. The soft-drink maker forecast a 12 percent increase in worldwide beverage sales in the third quarter, which would mark the company's best quarterly performance in five years.
Time Warner Inc. jumped $1.375, to $37.625. USA Today columnist Dan Dorfman reported the media giant may be the target of a takeover bid by General Electric Co. GE said yesterday that it "has had no discussions with Time Warner" about such an acquisition.