NEW YORK -- Although trading volume was unusually light, U.S. stocks rose yesterday for the first time in more than a week amid signs that this year's rise in interest rates, which lured investors into high-yielding bonds and threatened corporate earnings, is almost over.
"The Federal Reserve is just about done" raising interest rates, said Doug Person, vice president at Bridges Investment Counsel in Omaha, which has some $600 million in assets. As a result, the bond market won't become more attractive to equity investors, he said.
John M. Templeton, creator of the Templeton group of mutual funds, said there is little to worry about.
"Stocks in general will post a better return than that of other investments" over any 10-year period, so investors might as well buy them now, he said.
The Dow Jones industrial average rose 33.64 to 3,708.27 yesterday, the first advance since an 18.84-point gain Nov. 16 and its biggest one-day gain since Oct. 28's 55.51-point jump.
Shares of companies that are sensitive to swings in the economy -- Aluminum Co. of America, AlliedSignal Inc. and International Paper Co. -- were among the biggest gainers. The Morgan Stanley Cyclical Index gained 3.08 to 276.1.
Among broader market indexes, the Standard & Poor's 500 index rose for the first time in nine days, gaining 2.36 to 452.29. The Nasdaq combined composite index jumped 5.82 to 742.52.
Advancers outpaced decliners by about 5-to-2 on the New York Stock Exchange.
For a second day, banking and financial stocks, which have been among the biggest laggards during the past six months, helped lead stock prices higher.
The S&P; regional bank index of 21 stocks, down as much as 7.2 percent since Nov. 10., rallied 1.27 to 161.82, while the S&P; money-center bank index, off as much as 7.3 percent in that time, advanced 0.98 to 149.71.
First Interstate Bancorp gained $1.25 to $72.75; Wells Fargo & Co. jumped $1.50 to $149; BankAmerica Corp. gained 62.5 cents to $40.88 and Bankers Trust New York Corp. added 37.5 cents to $57.13.
On Wednesday, Bankers Trust settled a $73 million lawsuit over derivatives it sold to Gibson Greeting Inc., ridding itself of a suit that cast a pall over the bank's reputation for months.
Among the biggest losers, Intel Corp. slumped $1.25 to $63.88. The semiconductor company's newest Pentium microprocessor has a flaw that affects complex mathematical calculations, but won't affect most corporate or consumer users.
Stocks took a beating this week as investors, lured by yields that climbed two percentage points in 13 months, made bonds the primary alternative.
The benchmark 30-year Treasury bond now yields about 7.93 percent, compared with 5.77 percent in October 1993. Just last week, the Fed raised overnight lending rates for a sixth time this year to keep inflation from accelerating.
While yesterday's gains are some consolation to investors who saw the Dow industrials fall 2.8 percent this week and the S&P; 500 drop 2 percent, they may be misleading. That's because many investors stayed away following the Thanksgiving holiday.
Some 118 million shares changed hands on the NYSE in an abbreviated day of trading. Yesterday's volume was the lowest this year, far below the 430.74 million shares registered on Wednesday.
"I don't know that you can say there's a lot of conviction behind today's move," said Jim Macko, a trader at McDonald & Co. Investments in Cleveland.
AMG Data Services, a research firm that tracks mutual funds, said about $239 million flowed into stock funds in the week ended Wednesday -- down from $852 million in the prior week -- and below average weekly levels of more than $1 billion.
While some analysts discounted yesterday's move in stock prices, others contended that the drop in prices during the past week has given investors the chance to snap up battered shares for less than they would have paid only a week ago. Furthermore, the gain in bonds has pushed yields lower, making stocks more attractive.
"There's a better feeling in the market now that bonds have rallied and bond yields are down," said Alfred Goldman, market analyst at A. G. Edwards & Sons.
"It's different when bond yields are at 8.2 percent and when they're at 7.97 percent."
Intel, Cisco Systems Inc., Oracle Systems Corp., FPL Group Inc. and Telefonos de Mexico SA were the most active stocks in U.S. composite trading.
Sony Corp. American depositary receipts, each equal to one ordinary share, jumped $1.25 to $51.75.
Investors weren't discouraged by the entertainment and electronic company's recent write-down of its movie business, because entertainment operations accounted for only 19 percent of Sony's revenue during the six months ended Sept. 30, the Wall Street Journal reported, citing analysts.
Musicland Stores Corp. slumped $2 to $12.38. The compact disc and video cassette retailer was lowered to "underperform" from "neutral" at Smith Barney.