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Blue-chip stocks rally, bonds up for third day

NEW YORK: Blue-chip stocks rallied on Tuesday, while bonds rose for the third consecutive day amid mixed economic reports.

The dollar was little changed in quiet trading ahead of the Passover and Good Friday holidays later in the week. Gasoline futures hit the highest level in four years amid concerns about supplies.

The Dow Jones industrial average ended up 33.96 points at 5,671.68 after Monday's surge of 51 points. The rise in the Dow was fuelled by strong gains in the shares of International Business Machine Corp., which rose $7.25 to $117.375, and accounted for two-thirds of the Dow's advance.

In the broader market, advancing issues beat decliners 1,252 to 1,078 on active volume of 406 million shares on the New York Stock Exchange.

"Monday was mega-merger mania. Today it's 'Can't get enough of IBM day' on Wall Street," said Marty Kearney, a trader at PTI Securities.

IBM was the star performer due to hopes that strong demand for its mainframe computers will help Big Blue deliver strong quarterly results.

Lehman Brothers said it repeated its buy rating on IBM and said it viewed the stock as "deeply undervalued."

"People are trying to put money to work. It doesn't hurt to throw money at a stock like IBM," Kearney said. "Prospects look good for the next few quarters."

Frank Gretz, a technical analyst at Shields & Co. said that IBM shares had climbed from $83 in mid-January and reached $129 at the end of February.

"The stock has had a 50 percent retracement and stabilised," he said. "The next target is the low $120s and then we might have problems there."

Among economic reports, the Commerce Department said the nation's gross domestic product expanded at a 0.5 percent annual rate in the three months from October through December, down from an initial estimate of 0.9 percent and a fraction of the third quarter's 3.6 percent pace of expansion.

In another report, the leading indicators for February rose 1.3 percent, the largest jump since January 1976.

Some analysts said they saw signs of a pickup in the months ahead.

"The Fed's three rate cuts are beginning to have some effect and I think we'll look through this corporate earnings period and to the next few quarters for some strength," said Paul Rabbit, a quantitive analyst at Oppenheimer & Co.

In the bond market, the 30-year Treasury bond rose 15/32, or $4.6875 on a $1,000 bond, lowering its yield to 6.60 percent from 6.64 percent at Monday's close.

The dollar fell to 107.52 yen in late trading from 107.58 yen late on Monday. It slid to 1.4820 German marks from 1.4838.

Gasoline prices surged to a four-year high on shrinking inventories of crude oil and gas and recent refinery accidents and shutdowns that threatened to further tighten supplies.

May gasoline rose 2.11 cents to close at 68.11 cents a gallon on the New York Mercantile Exchange after rising as high as 68.20 cents, a four-year high for a nearby month.

May crude oil rose 44 cents to $22.70 a barrel, and May heating oil gained 1.74 cents to 59.72 cents a gallon.

Corn prices hit a record high at the Chicago Board of Trade of $4.19-1/2 a bushel on tight supplies and booming exports, before retreating as speculators took profits.

May corn ended 2.25 cents lower at $4.14-1/4 a bushel, May wheat firmed one-half cent to $5.12, and May soybeans declined 5 cents to $7.56.

Overseas, London's FTSE 100 index of leading stocks ended 10.1 points up at 3,728.5. In Tokyo, the 225-share Nikkei average closed up 39.69 points, or 0.18 percent, at 21,600.08.