NEW YORK -- U.S. stocks staged a late recovery yesterday, fueled by expectations that corporate profits will blossom later this year.
PepsiCo Inc. and Sears, Roebuck & Co., joined by bank, computer and insurance companies, helped drive the market to records for a second day.
Share prices seesawed, sending the Dow Jones industrial average up more than 50 points and down almost 50 points, before the 30-stock average closed at 5,630.49, up 22.03, for its 16th record of the year.
For the week, the Dow climbed 127.17 points, or 2.3 percent, bring the year-to-date gain to 10.03 percent.
The broad market also gained. The Standard & Poor's 500 index, representing 75 percent of the market capitalization of all U.S. stocks, rose 0.22 to a record 659.08 and the Nasdaq composite index added 0.68 to a record 1,117.79.
The Russell 2,000 index of small-company shares was up 0.62 to a record 325.76. The Wilshire 5,000 index slipped 6.07 to 6,443.26.
The number of declining stocks outpaced advancing issues by more than 12 to 11 on the New York Stock Exchange, where volume fell to 443.1 million shares from 485.5 million Thursday.
Volatile Treasury bond yields set the mood for most of the day, falling amid reports that the economy grew at a 0.9 percent annual rate in the fourth quarter, then rising when January housing starts climbed faster than expected.
Investors are counting on falling borrowing costs to spur growth in corporate profits. Yields on benchmark 30-year bonds rose to 6.40 percent from 6.33 Thursday.
PepsiCo Inc. vaulted $2.50 to $65.875. Investors drove up the soft-drink maker's shares after it appointed Roger Enrico as its new chief executive.
Sears rallied $2.625 to $47.875. Morgan Stanley & Co. raised its ++ investment opinion to "strong buy."
Equity investors bet that banking and insurance companies -- whose earnings are particularly sensitive to rates -- would continue to post healthy gains. The Standard & Poor's money center bank index rose 5.20, or 2 percent, to 257.53, chalking up a 4.5 percent increase for the week.
Chase Manhattan Corp. jumped $2.875 to $75.50; BankAmerica Corp. gained $1.75 to $72.75; Chemical Banking Corp. climbed $1.875 to $72.50; and J. P. Morgan & Co., part of the Dow, advanced $1.75 to $82.50.
Among insurers that advanced, American International Group Inc. rose $2.875 to $100 and Cincinnati Financial Corp. added $1 to reach $65.50.
Record amounts of money are flowing into U.S. equities, reflecting investors' growing confidence in the outlook for pTC stocks, analysts said. A year ago yesterday, the Dow first crossed 4,000. Since then, it has soared 40.8 percent.
The pace of new buying of stock mutual funds slowed in the most recent week to a net $2.4 billion, the lowest rate in eight weeks, but still an annual investment rate of $124.8 billion.
The most active stocks in composite trading were Cisco Systems Inc., Dell Computer Corp., Mobile Telecommunication Technologies Corp., DSC Communications Corp. and Sun Microsystems Inc.
Dell Computer fell $1.25 to $35.50. The Austin, Texas, company said fiscal fourth-quarter earnings of 70 cents a share, up from 68 cents last year, fell below expectations of 71 cents as the company shifted to new products and sold less-profitable items.
Mobile Telecommunication Technologies Corp. further damaged sentiment about the immediate outlook for earnings, posting a wider-than-expected fourth-quarter loss and saying its chief financial officer resigned. Its stock sank $3.75 to $14.125.
Alumax Inc. soared $5.625 to $38.125 after Kaiser Aluminum Corp. offered to buy the company for $40 to $45 a share, or about $2.2 billion in cash and stock. Alumax rejected the bid, leaving the door open for a higher offer. Kaiser rose 87.5 cents to $15.
C-Cube Microsystems Inc. surged $7 to $70 as investors bet that the company's digital compression video disk system, due out this year, will dominate the emerging digital video market.
Mossimo Inc., a sportswear maker, leaped $7 to $25. The company sold 4 million shares in an initial offering at $18 each.
Scotts Co., the distributor of seeds and other lawn products, slid $1.875 to $19.25. The company restated 1995 earnings, saying advertising and promotional costs were understated.