NEW YORK -- U.S. stocks rose yesterday as technology shares and issues sensitive to interest rates rallied despite lingering concern about a weak dollar.
"Stocks rallied, but there is an air of caution out there," said Alan Ackerman, market analyst at Reich & Co. "That can be traced to weakness in the dollar."
The Dow Jones industrial average rose for the fifth day, closing up 12.28, to 3,732.89, after falling as much as 20 points earlier. Shares of Philip Morris Cos. Inc., Sears, Roebuck & Co. and AT&T Corp. paced the advance. Meanwhile, oil stocks fell, led by Chevron Corp., Texaco Inc. and Exxon Corp., amid concern about refining and marketing profit margins.
The Standard & Poor's 500 rose 4.32, to 453.69. Gains in shares of telephone, utilities, banks, retailers and financial services companies led the index higher.
The Nasdaq combined composite index surged 10.38, to 721.90, its biggest gain since April 21. Semiconductor-equipment maker Applied Materials Inc.'s better-than-expected earnings for its second fiscal quarter gave battered technology stocks a respite.
Applied Materials rose $2.875, to $43.125; Nextel Communications Inc. soared $3.75, to $34.125; Microsoft Corp. gained $2.4375, to $97.0625; Cisco Systems Inc. added $1.75, to $23.875; and Lotus Development Corp. jumped $3.9375, to 55.9375.
About eight stocks rose for every three that fell on the New York Stock Exchange. Trading was active, with 337 million shares trading hands by 4 p.m. EDT., above the three-month average volume of 298 million shares.
Interest-rate sensitive stocks rose one day after the Federal Reserve lifted two short-term rates. The central bank increased the federal funds rate, which banks charge each other for overnight loans, to 4.25 percent from 3.75 percent and hoisted the discount rate, which it charges banks for loans, to 3.50 percent from 3 percent.
The Dow Jones utilities average, a predictor of interest-rate movements, rose 3.09, to 184.02. The average hit a 5 1/2 -year low of 177.76 on May 12.
"I think the belief is out there that the interest rate rises are out of the way," said Peter DaPuzzo, senior managing director at Cantor Fitzgerald Securities Corp. "If all rises are out of the way, the market can settle back and look at earnings."
Bank stocks rallied as investors dismissed concerns about higher interest rates and focused on the prospect of improved earnings from making loans, traders said.
NationsBank Corp. rose $1, to $55.50; Chemical Banking Corp. gained $1.625, to $37.375; and Wells Fargo & Co. rose $1.875, to $148.75.
After the Fed moved Tuesday, major U.S. banks raised their prime lending rate, or the rate charged to their best customers, to 7.25 percent from 6.75 percent -- the highest prime in almost 2 1/2 years. By raising their rate, banks maintained their net interest margins, or the difference between what they pay for funds and what they receive from making loans.
"We have become more hopeful that net interest margins may be better defended in 1994-1995 than many skeptics have been assuming," Judah Kraushaar, an analyst at Merrill Lynch & Co., wrote in a report yesterday.
The rise in technology and rate-sensitive shares overcame lingering concerns about the strength of the dollar. Earlier, stocks followed a decline in bond prices that was sparked by the dollar's fall, traders said.
The yield on the benchmark 30-year bond rose as high as 7.30 percent before ending at 7.27 percent, up fractionally from Tuesday, when bonds had their biggest day in more than three years after the Fed raised rates.