NEW YORK -- U.S. stocks closed higher yesterday as sliding long-term interest rates offset concern about the strength of earnings from companies like Nike Inc. and Apple Computer Inc.
The Dow Jones industrial average advanced 16.05, to 3,510.82, led by a gain in AlliedSignal Inc. The Standard & Poor's 500-Stock Index rose 2.52, to 446.20. Advancing common stocks led declining issues by about 9-to-7 on the New York Stock Exchange.
The Nasdaq Combined Composite Index fell 0.85, to 688.74. The American Stock Exchange's Market Value Index declined 0.18, to 436.64.
"The market stabilized after Friday's volatile session," said Alfred Goldman, market analyst at A.G. Edwards & Sons. The Dow industrials fell 27.12 Friday. More than two-thirds of the average's slump was tied to the quarterly expiration of stock options, stock-index options and futures contracts, analysts said.
"The market usually bounces back after the options expiration," DTC Mr. Goldman said. "The key for the market short term is corporate profits."
Stocks received a boost yesterday from a 3/8 -point advance in the benchmark 30-year Treasury bond. The yield fell three basis points, to 6.77 percent, the lowest level since April 22.
"Optimism about the bond market rally is helping minimize the overhanging concern about the strength of second-quarter earnings," said Peter Canelo, investment strategist at NatWest Securities.
The bond market's rally was triggered in part by J. Alfred Broaddus, president of the Federal Reserve Bank of Richmond, who said the Fed was determined to keep interest rates low, according to press reports.
Low interest rates have been one of the driving forces behind the stock market this year as investors moved money into shares instead of holding low-yielding fixed-income securities.
Meantime, the outlook for quarterly profits is less certain, as an increasing number of blue-chip companies warn that earnings may not meet analysts' projections.
"More and more people are starting to wonder whether earnings are going to match expectations, and that's a big concern for the stock market right now," said Michael Metz, investment strategist at Oppenheimer & Co.
Nike, Apple Computer, Minnesota Mining & Manufacturing Co., AMR Corp., USAir Group Inc., H.J. Heinz Co., and Hewlett-Packard Co. have released discouraging earnings reports in recent weeks. And analysts have raised concern about the earnings prospects of Du Pont Co., Digital Equipment Corp. and International Business Machines Corp.
All of this has prompted some analysts to predict that stock prices, near their highest levels in history, could soon fall. The market might slump as much as 10 percent over the next six weeks as second-quarter earnings are released, said Thom Brown, managing director at Philadelphia-based Rutherford, Brown & Catherwood Inc.
"There's no question the economic recovery is erratic, and this is going to become clearer with the release of second-quarter earnings," Mr. Brown said.