Stocks Rise, but Bond Investors Await Key Data

The stock market advanced broadly Wednesday for a second consecutive session, while bond yields were mostly unchanged ahead of key economic reports due today and Friday.

The Dow Jones industrials rose 52.56 points, or 0.6%, to 8,951.52, the first gain for the blue-chip index in six sessions.

The Nasdaq composite index, meanwhile, jumped 19.87 points, or 1.1%, to 1,851.64, after rising 0.6% on Tuesday.

Winners outnumbered losers by 19 to 10 on the New York Stock Exchange and by 25 to 17 on Nasdaq. Trading was active.

After diving Monday in the wake of a Wall Street Journal report that said the Federal Reserve Board is leaning toward tightening credit in coming months, the stock market over the last two sessions showed more of the resiliency that has been the hallmark of the 1990s bull market.

“This bull market is so powerful that you don’t kill it with one cannonball,” said Don Hays, chief investment strategist at Wheat First Union in Richmond, Va. Although the prospect of rising interest rates is a negative development for the stock market, “it’s just the first shot across the bow--it’s not going to sink the ship yet,” he said.

“The core underpinnings of the economy remain strong,” said Timothy O’Grady, a money manager at First Capital Group. “The economy is still expanding; we’ve got low inflation and good corporate profit growth.”

Still, the Dow index remains off 2.5% from its record high reached last week. It slid 1.6% on Monday alone, after the Fed story appeared.

The bond market has remained on edge this week, unsure of the Fed’s next move. On Wednesday, the yield on the 30-year Treasury bond was unchanged at 6.07%, which is the highest since March 3. The yield jumped over the 6% mark on Monday.

Economic reports due today and Friday could sway the Fed. The government today will release its initial estimate of first-quarter gross domestic product, as well as the first-quarter employment cost index--the broadest measure of changes in wages, salaries and benefits.

While GDP probably rose at a brisk 3.4% real annualized pace, the bigger issue for the Fed is how fast wages are rising. Sharp wage growth could mean inflationary pressures in the economy.

The ECI probably rose 0.9% in the quarter, compared with a 1% gain in the fourth quarter, economists said.

On Friday, additional reports will paint a picture of the economy’s trend in April.

“If we don’t start to see a slowdown in the economy, it may force the Fed’s hand,” said James Pizzo, a portfolio strategist at CIBC Oppenheimer in New York.

The Treasury sold new five-year notes Wednesday at an average yield of 5.795%, slightly above expectations.

Among Wednesday’s highlights:

* Major retail stocks were strong after Dayton Hudson, parent of Target and Mervyn’s, said April sales through last Saturday were ahead of expectations. Dayton shares surged $2.75 to $84.63, Sears gained $1.56 to $57.81, Safeway leaped $2.19 to $37.75 and Federated Department Stores rose $1.38 to $49.

* Many tech stocks continued to rebound. Hewlett-Packard jumped $2.69 to a record $75, Sun Microsystems rose $1.06 to $41.56, Adobe Systems gained $1.81 to $50.63, Computer Associates surged $2.13 to $59.88, ISS Group jumped $3 to $45 and Ingram Micro rose $1.88 to $44.63.

* In the telecom sector, Qualcomm rose $2.25 to $56.13, Scientific Atlanta gained $1.75 to $23.69 and Newbridge Networks added $1.94 to $28.75.

* In the Internet sector, America Online rocketed $5.13 to a record $80.50 after Merrill Lynch upgraded the stock to “buy” from “neutral,” calling the company “one of a very few companies that will almost necessarily emerge as a primary conduit to the universe of online/Internet.”

Other gainers included EarthLink Network, up $5 to $70.50, and Netscape, up $3.13 to $28.19.

Also, 7th Level climbed $1.53 to $7.81 as the developer of interactive education and entertainment software announced a new management team to lead the company’s entry into the market for Internet tools and technology.

* Among new stock issues, Ziff-Davis rose $2.19 to $17.69 as the publisher and trade show organizer raised $400 million in its initial offering. The New York-based unit of Japanese software distributor Softbank sold 25.8 million shares, or a 26% stake, at $15.50 a share.

* Oil field services shares turned hot again. Schlumberger shot up $5 to $83.44, Western Atlas jumped $3.56 to $79.19 and Halliburton rose $2.63 to $55.

* On the downside, Borg-Warner Automotive dropped $4.06 to $61 on expectations that the auto parts maker’s second-quarter earnings will be hurt by lower output of Ford’s F-series pickups and weaker demand for four-wheel-drive systems.

Market Roundup, D8