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Stocks Gain Ground As Interest Rates Decline

Associated Press

A tame economic reading helped lower interest rates in the bond market, lifting stocks on Wednesday. But investors, fearful of the unexpected in the week’s remaining economic reports, continued to favor blue-chip issues and shy away from more speculative shares.

The Dow Jones industrial average rose 46.98 points to 5,528.91, the blue-chip measure’s first close above 5,500 since the market’s steep sell-off two weeks ago on inflation and corporate profit worries.

Broad-market indexes posted more modest gains after a shaky start.

“The market is concerned about liquidity in smaller names. We learned in July that sometimes we have to sell these things,” said David Shulman, chief market strategist at Salomon Brothers.

For the second straight session, stocks took their cue from the bond market, where growing optimism for mild inflation helped send long-term interest rates back below 7 percent.

Advancing issues outnumbered decliners by nearly a 7-to-4 margin on the New York Stock Exchange, where volume totaled 402.52 million shares as of 4 p.m., up considerably from Tuesday’s sluggish pace.

Some of the stocks that moved substantially or traded heavily Wednesday:

NYSE

AT&T, up 1-1/4 at 52-1/4.

Morgan Stanley analyst Stephanie G. Comfort resumed coverage of AT&T with a favorable rating, the Dow Jones News Service reported. Morgan Stanley had stopped its coverage last September because it was advising AT&T on the spinoffs of its various units, including Lucent Technologies.

Saks Holdings, up 2-1/4 at 31.

Goldman Sachs raised its investment opinion on Saks, the Dow Jones News Service reported. Goldman was the lead manager of Saks’ initial public offering in May.

NASDAQ

Calgene, up 1-5/16 at 6-3/16.

Monsanto announced plans to acquire a controlling interest in the struggling agricultural biotechnology company. Calgene’s chairman and chief executive of 12 years, Roger Salquist, resigned but said he will continue to serve as a director and consultant.

World Airways, up 1/4 at 6.

The carrier said it will discontinue its scheduled flight service to focus on contracts with the U.S. military and international airlines.

AMEX

Viacom Class B, up 1/8 at 35.

The media conglomerate reported that its second-quarter earnings fell 22 percent as its Paramount Studios unit recorded lower revenue from its movie and television programming segment.