Stocks Extend Gains in Slow, Steady Rebound

The stock market on Tuesday scored its fifth gain in six sessions, continuing a slow but steady rebound after a sharp sell-off in the first three weeks of the new year.

Falling oil prices helped sentiment, as did some strong earnings reports and expectations of more corporate mergers ahead.

Stocks advanced, and bond yields were little changed, even though the Federal Reserve today is expected to raise its benchmark short-term interest rate to 2.5% from 2.25%, the sixth increase since the central bank began tightening credit in June.

Market bulls don’t see higher rates as an impediment. “The market and the economy can withstand the move” in short-term rates, said John Rhodin, who oversees $770 million as director of research at Boys Arnold & Co. in Asheville, N.C.

The Dow Jones industrial average added 62 points, or 0.6%, to 10,551.94, nearly the same point gain as on Monday. American Express helped lift the Dow after announcing plans to spin off its financial advisory unit.

The broader Standard & Poor’s 500 index rallied 8.14 points, or 0.7%, to 1,189.41, and the technology-dominated Nasdaq composite was up 6.29 points, or 0.3%, to 2,068.70.

“I think what we’ve got here is a market that looks like it’s on the mend,” said Philip Dow, strategist at Dain Rauscher Wessels in Minneapolis.

Investors have been encouraged in recent sessions by some upbeat corporate profit reports and by merger plans involving some big-name companies. Procter & Gamble last week said it would buy Gillette; SBC Communications plans to acquire AT&T.;

The merger deals suggest rising optimism in the executive suite, some analysts say.

The significant voter turnout in Iraq’s elections Sunday helped to boost Wall Street on Monday, and the mood carried over to Tuesday. Key indexes rose early in the day and mostly held on to their gains.

Winners outnumbered losers by 2 to 1 on the New York Stock Exchange and by 4 to 3 on Nasdaq.

In commodities trading, near-term oil futures in New York pulled back, losing $1.08 to $47.12 a barrel after rising $1.02 on Monday.

The bond market was calm ahead of the Fed’s expected announcement on short-term rates. The yield on the 10-year Treasury note was at 4.14%, up from 4.13% Monday.

Most economists believe the Fed will reiterate that it expects to continue raising short-term rates at a “measured” pace. That wording has removed the element of surprise from the Fed’s campaign, allowing investors to better plan for tighter credit as the economy grows, analysts say.

Among Tuesday’s market highlights:

* Stocks rising on earnings reports or forecasts included orthopedic-implant maker Zimmer Holdings, up $8.55 to $87.40; communications-products distributor Anixter, up $2.66 to $36.09; household-fixtures producer American Standard, up $3.22 to $43.26; and casino giant MGM Mirage, up $1.98 to $73.79.

* On the downside, disappointing earnings hit conglomerate Tyco, which slid $1.63 to $34.51; and temporary staffing provider Manpower, which slumped $5.29 to $43.36.

* Energy shares rallied despite falling oil prices. The XOI index of 13 major oil stocks jumped 1.8% to a record 758.91. It has soared 9.7% since Jan. 5.

Exxon Mobil gained $1.67 to $53.27, Encana was up $1.26 to $60.35, and Valero Energy, which reported sharply higher quarterly earnings, surged $4.93 to $56.96.

* Many industrial issues were higher even though the Institute for Supply Management said its index of U.S. factory activity showed slower growth last month.

Emerson Electric rose $1.15 to $68.39 and Ingersoll-Rand jumped $3.34 to $77.72 on their respective earnings reports. Other industrial winners included Rockwell Automation, up $1.25 to $57.90, and Timken, up $1.24 to $27.

* In the Internet sector, EBay continued to slide, losing $3.57 to $77.93, its lowest since August. The company last month issued a growth forecast that disappointed Wall Street.

But Google rocketed to a record $210.30 in after-hours trading, from a closing price of $191.90, after the company reported sharply higher earnings.

* Among companies planning initial public stock offerings, San Francisco-based Dolby Laboratories, a developer of music and motion picture sound systems, gave details of its IPO plans. The company and its investors hope to sell a total of 27.5 million shares at $13.50 to $15.50 apiece.

DexCom, a San Diego-based company that makes sugar-monitoring devices for diabetics, said it planned to raise as much as $70 million in an IPO.