NEW YORK -- U.S. stocks stabilized yesterday after Thursday's plunge, buoyed by a rally in computer stocks and perceptions that Orange County, Calif.'s bankruptcy won't cripple the economy or financial markets.
"I think we've weathered the storm," said Brian Grove, manager of the $225-million Transamerica Growth & Income Fund.
Still, stock prices seesawed throughout the day as people tried to sort out the bankruptcy's repercussions for the economy and financial assets, traders said. Some analysts said the stock market could resume its decline Monday as the fallout from Orange County on Wall Street firms and taxpayers becomes clearer.
The Dow Jones industrial average closed up 5.38, at 3,691.11, after a roller coaster day in which the average fell as much as 30.62. The average tumbled 49.79 points Thursday and was down 1.5 percent for the week. The Dow industrial average has fallen more than 2 percent since Orange County's investment losses were disclosed Dec. 1.
"Orange County brings up the fear of whether people want to have their money in any paper right now, regardless of whether it's bonds, stocks, or munis," Mr. Grove said. "It makes the typical guy on the street very defensive."
Broader market indexes also steadied, though almost twice as many stocks fell as rose on the New York Stock Exchange. The Standard & Poor's 500 Index closed 1.52 higher, at 446.97, after falling as much as 2.57. On Thursday, the S&P; 500 fell 5.78, to 445.45, its lowest close since June 30.
The Nasdaq combined composite index closed down 0.07, at 719.05, after rebounding from an 8.18-point loss. The index plunged 15.15, to 719.12, on Thursday, its biggest one-day drop since Nov. 22.
Orange County and its investment pool filed for protection from creditors on Tuesday after the fund lost at least $1.5 billion, or 20 percent of its value, because of bad bets on interest rates. It was the largest municipal bankruptcy in U.S. history.
The debacle, coupled with the Fidelity Magellan fund's decision not to pay an end-of-year distribution, sparked concern that rising interest rates will prompt more people to flee stock mutual funds in favor of cash and bonds.
Trading was unusually active yesterday, with 336 million shares changing hands on the Big Board.
Semiconductor and computer stocks led the S&P; 500 higher as an industry report showing new orders for chips increased in November spurred optimism about the outlook for computer sales.
The Semiconductor Industry Association said its book-to-bill ratio rose to 0.99 in November from 0.96 in October, which means chip makers received $99 worth of new orders for every $100 worth of product shipped last month.
Motorola Inc. added $1.375, to $55.25, and Texas Instruments Inc. gained $1.375, to $72.
International Business Machines Corp. shares rose $1.375, to $71.50, leading the rebound in the Dow. Compaq Computer Corp. climbed 87.5 cents, to $39.875, and Digital Equipment Corp. rose $1.75, to $34.
Declines in some in financial-services companies offset the rallies in high-technology stocks.
Federal National Mortgage Association fell 37.5 cents, to $68.60, and Federal Home Loan Mortgage Corp. dropped 50 cents, to $47.75.
Travelers Inc., parent of Smith Barney, fell 62.5 cents, to $31.25. Equitable Cos., parent of Donaldson, Lufkin & Jenrette Securities Corp., closed down 37.5 cents, at $16.875.
A steady bond market also helped avert a plunge in stocks, traders said. The yield on the benchmark 30-year Treasury bond fell as low as 7.83 percent before closing at 7.86.