Blue Chips Rally for Third Day in a Row

The Dow Jones industrial average on Wednesday wiped out another chunk of its recent slide, but investors remained too fretful about inflation and interest rates to bet on anything but big companies.

The Nasdaq market sagged again as the battered technology sector continued to struggle.

The Dow, which had slid nearly 700 points in one month before this week’s rally, rose 92.71 points to 6,679.87, bringing its three-session rebound to 288 points.

“This appears to be a very narrow but very powerful buying frenzy in the biggest of the bigs and the bluest of the blues. If you’re not in that exclusive club, you’re probably not doing so well today,” said Robert Streed, senior investment advisor at Northern Trust in Chicago, calling the rally unconvincing.

The rebound “may just turn out to be a bounce off the lows. The lack of volume and the lack of breadth makes me wonder if this rally is sustainable,” Streed said.

News that tobacco companies were negotiating with state attorneys general to settle the massive lawsuits sparked new life into tobacco shares and helped stocks advance despite a weak performance by bonds.

U.S. Treasuries initially fell on the news that industrial output surged 0.9% in March, straining the capacity of the nation’s factories, mines and utilities to maintain production without inflationary bottlenecks developing.

As bond prices fell, the yield on the benchmark 30-year Treasury bond rose from late Tuesday’s 7.09% to as high as 7.15%, before pulling back to 7.09%. On Monday, the long-bond yield rose to a nine-month high of 7.17%.

But as blue chips were roaring ahead, many analysts focused on the broad market, which was fairly mixed. Advancing issues outnumbered decliners by a 4-to-3 margin on the New York Stock Exchange in moderate trading.

Once again, technology shares failed to take part in the rally, resulting in a second consecutive decline for the Nasdaq Composite index, which ended 2.61 points lower at 1,210.27.

The Standard & Poor’s 500-stock list rose 8.81 points to 763.53. The NYSE composite index rose 4.13 to 401.75, and the American Stock Exchange composite index rose 1.45 to 556.51.

Among Wednesday’s highlights:

* The Dow’s advance was led by Philip Morris, which jumped 4 1/4 to 43 1/4 on reports of a possible global settlement. Other tobacco makers also surged: RJR Nabisco gained 3 1/4 to 33 1/2; the American depositary receipts of BAT Industries advanced 1 to 17; Loews surged 5 3/8 to 91 3/4; UST added 3/8 to 27.

* In the technology sector, strong quarterly reports caused Compaq Computer and Sun Microsystems to sink. Compaq fell 1 1/4 to 73 3/8, and Sun fell 1 15/16 to 27 7/16.

Software maker Clarify dropped 9 3/4 to 7 after it said it expects little or no revenue growth in the second quarter.

Qualcomm fell 4 to 50 5/8 after a California court dismissed an unfair-competition lawsuit filed against rival Ericsson.

* Otherwise, the flow of profit reports was generally encouraging. Ford, up 1 5/8 to 34 7/8; Merck, up 1 1/8 to 85 5/8; and Time Warner, up 3 1/8 to 43 7/8; Eastman Kodak, up 2 3/4 to 78 1/8; and Caterpillar jumped 1 5/8 to 84 5/8. All exceeded analyst projections.

In New York the dollar settled at 125.75 Japanese yen, down from 126.09 yen Tuesday.

Overseas, London’s FTSE-100 finished 7.8 points higher at 4,294.6. In Tokyo, the 225-share Nikkei average climbed 97.61 points to close at 18,031.20.

Market Roundup, D6