NEW YORK -- U.S. stocks, led by Microsoft Corp., other technology companies and oil issues, gained yesterday as the dollar rebounded and U.S. Treasury bonds rallied.
The advance wasn't widespread; 11 stocks rose for every 10 that fell on the New York Stock Exchange. Electrical equipment, telephone and utility shares also paced the stock market.
The dollar's recovery eased concern that interest rates will be forced higher, choking off the economic expansion and corporate profits, investors said.
Share prices were "fueled by the good earnings at so many companies," such as Microsoft, said Steven Zenker, money manager at $100 million McCabe Capital Managers in King of Prussia, Pa. Also helping was the prospect of investors who lost money in Latin American and Asian markets returning some assets to the U.S., Mr. Zenker said.
The Dow Jones industrial average rose 16.60, to 3,979.23, boosted by gains in Texaco Inc., Exxon Corp. and Aluminum Co. of America, plus a bond rally that lowered yields on benchmark 30-year issues to 7.55 percent from 7.63 percent Tuesday.
The Dow plummeted 34.93 Tuesday, the biggest loss in seven weeks, as the sliding dollar heightened concern that prices for imports will rise, making it more likely the Fed would lift rates as early as the end of this month to keep a lid on inflation.
The Standard & Poor's 500 stock index rose 1.02, to 483.14. The Nasdaq composite index gained 4.48, to 795.81, boosted by Microsoft, Cisco Systems Inc., Apple Computer Inc., U.S. Healthcare Inc. and Bay Networks Inc.
The Russell 2,000 index of small stocks added 0.74, to 254.87, and the Wilshire 5,000 index rose 8.89, to 4,758.42.
New York Stock Exchange volume totaled 349.8 million shares, up from this year's average of 330.3 million.
Yesterday's strength came as Microsoft surged $3.16, to $68.50, a 52-week high, after the software company's executives spoke at a three-day Technology Investment Symposium in New York sponsored by Goldman, Sachs & Co. They suggested the
company's long-awaited Windows 95 operating system is on schedule for delivery this August, and that the dollar's drop will boost Microsoft's overseas sales.
A handful of technology stocks rose in tandem with Microsoft. Novellus Systems Inc. climbed $1.875, to $56.75; VLSI Technology Inc. added 62.5 cents, to $16.4375; BMC Software Inc. spurted $2.375, to $65.625; Adobe Systems Inc. jumped $1.50, to $36.75; Sybase Inc. rose 87.5 cents, to $44.25; and Tektronix Inc. gained 50 cents, to $32.50.
High-tech companies won't grow as fast as the most optimistic investors think, but they will beat the averages, said Michelle Clayman, chief investment officer at New Amsterdam Partners L.P., which manages assets of $160 million.
"The way I look at it, 13 percent annual earnings growth the next five years is almost twice that of the overall market, and that's not bad," said Ms. Clayman.
Oil stocks climbed as investors looked for large, safe stocks that pay a high dividend yield. Mobil Corp. rose $1.375, to $89.50; Texaco gained $1.25, to $65.375; Amoco Corp. rose $1, to $60.50; Exxon rose 87.5 cents, to $64.875; and Chevron Corp. added 62.5 cents, to $47.625.
"If the price of oil stays around $18 [a barrel], and if we have a normal, cold winter [next] year, then revenue will be in the double digits," said Larry Babin, manager of Victory Diversified Stock Fund, a unit of Cleveland's KeyCorp. Victory manages assets of $250 million.
Profits of oil companies with at least $5 billion market value will swell between 15 percent and 30 percent in the next year, Mr. Babin said.
How long stocks' rally will last is uncertain, analysts say. Mr. Zenker and others said they're skeptical both of yesterday's recovery and of stocks' resilience during the dollar's slump to record lows the past two weeks.
"The chance that interest rates could rise again means the economy could dip into recession in a year or two," cutting off corporate profit growth, Mr. Zenker said. "It doesn't seem like the market is taking account of any of the bad news."
Others believe what they see. "The market has shown an awful lot of strength," said Joseph DeMarco of HSBC Asset Management, a unit of Hongkong & Shanghai Bank. "It's so resilient, you throw everything at the market, from the Kobe earthquake to Barings, and it won't go down."
The dollar rebounded yesterday from historic lows against the German mark and the Japanese yen, helped by remarks from Federal Reserve Board Chairman Alan Greenspan that the dollar's weakness was unwelcome and troublesome to administration officials, and that it was important to limit its decline. A Bundesbank council member also said the German central bank might consider another cut in its key interest rate, which would make dollars more attractive.