Stocks Post Small Gains as Yields Climb

Stocks eked out small gains Monday while bond prices fell for the second consecutive session as investors grappled with signs of renewed U.S. economic vigor.

The Dow Jones industrial average rose 4.41 points to close at 8,198.45. Broader stock indicators posted slightly bigger gains, led by the technology-heavy Nasdaq composite index, which closed at a record high for the fourth consecutive session.

“It’s just amazing. This market won’t stay down,” said Thomas McManus, chief U.S. investment strategist at NatWest Markets, noting the two-session pullback in the bond market. “Given the fact that bond yields have risen so sharply, it’s somewhat mystifying that the damage has been so limited.”

Bonds slipped amid lingering inflation worries from Friday’s economic data, as well as concerns that the market will have difficulty absorbing new government bonds from this week’s Treasury auctions.

The spillover concerns about Friday’s news of rising raw material prices overshadowed Monday’s economic data, which offered some support for the argument that economic activity has been slowing enough to keep inflation in check.

The Commerce Department reported that construction spending unexpectedly tumbled 1.1% in June, the worst showing in six months. The May reading, however, was revised sharply upward to an increase of 0.3% from the initial estimate of a 1.8% drop.

As bond prices fell, the yield on the 30-year Treasury--a big influence on borrowing costs--rose to 6.47%, up from Friday’s 6.44% and Thursday’s 6.30%, which was a 17-month low.

But even as bonds struggled with the inflationary potential of the re-accelerating economy, stock investors were betting that the pickup in activity indicated by Friday’s data may bolster profits.

Advancing issues outnumbered decliners by a small margin on the New York Stock Exchange in moderate trading.

The Standard & Poor’s 500-stock list rose 3.16 points to 950.30; the NYSE composite index rose 0.95 point to 491.93.

The Nasdaq posted solid gains, rising 11.12 points to a record 1,605.45.

Among Monday’s highlights:

* Retail shares provided some rare market leadership in advance of this week’s reports on July sales by major chain stores. The Dow’s strongest issues included Sears, up $2.13 to $64.38, and Wal-Mart, up $1.19 to $37.88.

* Leading the tech sector higher was Intel, up $3.13 to $96.75; Xilinx, up $3.81 to $52.81; and Lam Research, up $3.56 to $59.06.

* A strike against United Parcel Service buoyed shares of its rivals. Yellow, a trucking company, gained $1.19 to $28.25; Airborne Freight rose $1 to $48.75; and Federal Express climbed 75 cents to $63.69.

* Fisher Scientific International rose $2.44 to $50.81 after reports that Kohlberg, Kravis Roberts & Co. is considering a bid for the scientific equipment company.

* British Airways’ American depositary receipts dropped $4.75 to $100.81 after the carrier said first-quarter profit fell 36%.

Mexico City’s Bolsa index rose 68.04 points, or 1.35%, to 5,135.24. Tokyo’s Nikkei stock average fell 0.7%, Frankfurt’s DAX index fell 2.5% and London’s FTSE-100 fell 0.1%.