Blue Chips, Utilities Lead Rally

U.S. stocks rebounded from last week’s heavy losses and ended mostly higher Monday, but investors hoping for a break from Friday’s wild ride were hit with another day of volatility.

Meanwhile, long-term Treasury bond yields fell to fresh four-year lows, while short-term rates rose to two-year highs amid talk of foreign central bank sales.

On Wall Street, the Dow Jones industrial average rose 63.02 points, or 0.8%, to close at 7,819.31, after surging in the morning, selling off at midday and rallying again near the close.

Most broad market indexes also ended higher, with the Nasdaq composite index gaining 7.32 points, or 0.5%, to 1,532.06.

Winners topped losers 17 to 13 on the New York Stock Exchange, but losers had a 23-20 edge on Nasdaq.

The market opened higher Monday, shaking off another bout of bad news from Asia, as Tokyo stocks plunged and South Korea bonds were downgraded to junk status.

U.S. blue chips rose as buyers entered in the wake of Friday’s 90-point Dow decline. The Dow had been down as much as 269 points Friday morning, in very heavy trading skewed by options and futures expirations.

“Investors are moving into beaten-up stocks, particularly technology companies,” said Tony Hitschler, president of Brandywine Asset Management, which oversees $7 billion. “Crowd behavior can change in a blink of an eye.”

Electric utility stocks also helped boost the market, rising in the wake of a surprise merger deal between two major utilities.

Stocks were assisted by falling long-term bond yields, as continued demand for long-term issues sent the yield on the bellwether 30-year Treasury bond to 5.87% at Monday’s close, down from 5.92% on Friday and a fresh four-year low.

But shorter-term interest rates took a surprising jump. The yield on three-month T-bills auctioned Monday was 5.44%, the highest since late 1995.

The three-month T-bill yield has surged from 5.17% on Dec. 11.

Traders said shorter-term interest rates were being pushed higher by technical year-end trading and by rumors that Asian central banks were selling shorter-term Treasuries to raise cash to boost their beleaguered economies.

The Treasury also issued new two-year notes Monday. The $15-billion offering carried an annualized yield of 5.69%.

In currency trading, the dollar rose for a third day against the yen, as Japanese stocks dove.

Among Monday’s market highlights:

* Among blue chips, Merck gained $3.31 to $105.94 as the Food and Drug Administration cleared it to sell Propecia, the first prescription pill to treat male baldness.

* AT&T; also continued to advance, rising $2.63 to $63.94 amid expectations of further restructuring steps.

* The Dow utility index jumped 1.1% to a record 267.71 after American Electric Power and Central & South West agreed to merge.

Other utilities rising included Edison International, up 38 cents to $26.25, and PG&E;, up 44 cents to $30.44.

* In the tech sector, Intel rose $1.44 to close at $71.44 and Dell Computer gained $3.31 to $81.63.

* Retail stocks struggled amid continued reports of a weak to moderate Christmas season. Federated Department Stores lost $1 to close at $40.94, J.C. Penney fell $1.63 to $58.88 and May Department Stores lost $1.63 to close at $50.50.

In Europe, Frankfurt’s DAX index fell 1% and London’s FTSE-100 ended the day virtually unchanged, down 2 points.

In commodities markets, the Bridge Commodity Research Bureau futures price index fell to its lowest level in almost 2 1/2 years, dragged down by sagging prices for everything from crude oil to copper to gold.

Demand for many raw materials slumped in recent months as the economies of key importers such as Japan, South Korea, Malaysia and other Asian nations slowed. A slide in consumption came as refineries, mines and farmers boosted output, flooding the market with fresh supplies, analysts said.