Blue Chips Make Modest Rebound; Yields Hold Steady

Blue-chip stocks bounced back Monday from a steep two-session decline as a late-session recovery in bonds helped bolster investor confidence.

Strength in the stock and bond markets helped push the dollar higher, but soybean prices fell after the Midwest received some much-needed rainfall.

After sliding below the 8,000 level early in the day, the Dow Jones industrial average rallied back to close at 8,062.11, up 30.89 points from Friday. The blue-chip index of 30 stocks had lost 228 points in the previous two sessions after long-term interest rates soared unexpectedly.

In the broader market, declining issues led advancers 1,483 to 1,344 in moderate trading on the New York Stock Exchange.

The late-session recovery in blue-chip stocks did not touch all sectors, however.

The Nasdaq composite index finished down 11.78 points at 1,586.74 on further profit-taking in high-technology stocks.

The Standard & Poor’s 500-stock index rose 3.46 points to 937.00, and the NYSE composite index rose 1.42 points to 485.21.

Despite the mixed performance, traders said they did not see much of a carry-over from Friday’s sell-off, which sent the Dow plunging 156 points.

Several traders said trading was typical of a summer Monday.

“We really didn’t get much of a follow-through to that scare on Friday,” said Bill Allyn, head of trading at Jefferies & Co. “That in itself is good news.”

As they did last week, stocks took their cue from bonds. The bond market in turn got a boost from remarks by Federal Reserve Board Gov. Susan Phillips, who suggested that there appears to be no immediate need for a tightening of credit.

Recent economic data indicating a strengthening economy had rekindled speculation that the Fed would need to raise interest rates to keep inflation at bay.

The Federal Open Market Committee, the central bank’s policy-setting body, has its next meeting Aug. 19.

After rising earlier in the session, the yield on the benchmark 30-year Treasury bond ended at 6.63%, unchanged from Friday.

Traders said they expect tentative trading until the appearance of reports Wednesday on retail sales and producer prices for July. Figures on July consumer prices are due Thursday.

“Don’t expect it to get much clearer until Wednesday and Thursday,” said Guy Truicko, equity portfolio manager at Unity Management. “Then we’ll see where we go from there.”

Among Monday’s highlights:

* The Dow’s advance was led by Chevron, up $2.38 to $80.06; J.P. Morgan, up $2.75 to $113.44; and Procter & Gamble, up $2.69 to $146.44.

* Coca-Cola fell for a second session, pushing other consumer stocks down with it. The soft drink leader said Friday that its third-quarter earnings would exceed year-ago levels only slightly. Coke lost 94 cents to $61.75. But rival PepsiCo rose 69 cents to $38.19.

* Drug stocks fell after Morgan Stanley said it did not expect the sector to outperform the broader market in coming quarters.

Merck fell $3.56 to $95.25, Pfizer was off 44 cents at $54.88, Bristol-Myers Squibb lost $1.56 to $75.56, and Johnson & Johnson declined $1 to $58.31.

* Computer-related stocks came under heavy pressure from profit-takers. Apple Computer fell $2.25 to $24.56, Ascend Communications slid $4.75 to $45.69, Intel fell $1.69 to $96.13 and Dell Computer lost $3.88 to $75.75.

In currency trading, the dollar recouped some of Friday’s sharp losses against the German mark and Japanese yen.

The dollar rose to 1.8640 marks from 1.8452 marks on Friday, and it settled in New York at 116.12 yen, up from 114.95 on on Friday.

Soybean prices fell sharply as much-needed rains soaked crops in the Midwest, improving the prospects for this year’s harvest.

At the Chicago Board of Trade, soybeans for November delivery closed down 27.5 cents a bushel at $6.10.

Elsewhere, Mexico City’s Bolsa index declined for the third straight session on concern over higher interest rates. The Bolsa, led by mining company Industria Penoles and truck manufacturer Consorcio Grupo Dina, fell 31.40 points, or 0.61%, to 5,043.65.

Investors are concerned that U.S. interest rates could rise. If that happens, Mexico would be forced to raise its own rates to keep investors attracted to Mexican assets. Higher rates make corporate borrowing more expensive and could slow the rebound in consumer spending, said Jorge Sigg, manager of the $1.4-billion Fondo Mexico fund.

Still, with the Bolsa index having gained g 51% so far this year, many analysts and fund managers see the recent drop in share prices as a short-term adjustment.

Market Roundup, D14