Dow Recoups Early Loss, Gains 21.83 Points

Stocks struggled higher Tuesday, erasing more of July’s pullback, as interest rates held firm in the bond market despite a new round of heavy government borrowing.

But trading was slow and cautious for the second straight session as investors found few incentives to bid an increasingly pricey market back into record territory.

The Dow Jones industrial average rose 21.83 to 5,696.11, having recovered from an early 26-point deficit and briefly moving above 5,700 for the first time since early July.

In just three weeks, the blue-chip barometer has snapped back by more than 500 points from the depths of last month’s sell-off, and is now less than 82 points from its record high at 5778.00, set May 22.

The more speculative sectors of the market still remain well below their highs, but the sudden return to near-record levels for blue-chip issues has started to slow the market’s momentum.

“The basic problem is that the stock and bond markets have done well in the last few days and there’s not that much stimulus to keep them going,” said A. Marshall Acuff Jr., market strategist at Smith Barney.

Advancing issues outnumbered decliners by a 10-to-9 margin on the New York Stock Exchange, where volume totaled 347.22 million shares as of 4 p.m., easily exceeding Monday’s sluggish pace, the second slowest all year.

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

NYSE

Hormel Foods, down 1-1/4 at 20-1/2.

The maker of Spam and other meat products expects earnings for its recently completed quarter to be well below last year’s results and Wall Street’s expectations.

J.C. Penney, down 1-3/8 at 51-5/8.

Fay’s, up 3/8 at 12-1/4.

Penney is acquiring Fay’s for about $285 million in stock, a move that accelerates consolidation in the drugstore industry. Fay’s stockholders will receive $12.75 in Penney common stock for each share held.

Hershey Foods, up 3/8 at 84-1/4.

The candy company raised its quarterly dividend 12 percent and declared a two-for-one stock split.

NASDAQ

Cisco Systems, up 1-5/8 at 57-3/16.

The maker of computer networking equipment agreed to acquire privately held Nashoba Networks in a stock swap valued at about $100 million.

Sun Microsystems, down 2-1/2 at 53-1/8.

Donaldson Lufkin & Jenrette Securities analyst Thomas Rooney downgraded Sun, the Dow Jones News Service reported.

U.S. Long Distance, up 2-11/16 at 7-1/16.

Interstate/Johnson Lane analyst Stephen J. Shook raised his investment rating on U.S. Long Distance, the Dow Jones News Service reported.