NEW YORK -- U.S. stocks rose along with bonds as commodity prices fell yesterday, easing concern about inflation and higher interest rates.
"Stocks are really moving in knee-jerk reaction to bonds and commodities," said Gerald Simmons, manager of institutional trading at Interstate/Johnson Lane Inc. in Atlanta. "Everything is sort of intertwined."
The Commodity Research Bureau index of 21 major commodity prices, regarded as a barometer of inflation, fell 1.33, to 237.28, after reaching a 3 1/2 -year high yesterday. The decline cheered bondholders, whose investments lose value as inflation rises.
Stocks gained as bond yields, which move in the opposite direction of prices, fell. The yield on the benchmark 30-year government bond fell to 7.38 percent from 7.39 percent yesterday. Lower yields make stocks relatively more attractive than bonds.
The Dow Jones industrial average rose 20.93, to 3,811.34, erasing most of Wednesday's 24.42-point decline. Gains in Exxon Corp., Coca-Cola Co. and United Technologies Corp. paced the advance.
Exxon rose $1.875, to $58.875, after falling $5.125 over the first three days of this week.
Goldman, Sachs & Co. added the stock to its "recommended" list after the decline, which began when a federal jury decided Monday that the company acted recklessly in the nation's largest oil spill five years ago in Alaska.
Among broader market measures, the Standard & Poor's 500 index rose 1.32, to 461.93. Oil, telephone, household products and retail stocks led the advance. Shares sensitive to swings in interest rates -- banks and utilities -- were the biggest losers.
The Nasdaq combined composite index, which fell as much as 2.63 points, closed down 0.87, to 734.97. Losses in Microsoft Corp., Intel Corp. and Apple Computer Inc. offset gains in Tele-Communications Inc., Amgen Inc. and Comcast Corp.
Advancing issues outpaced decliners by about 11 to 9 on the New York Stock Exchange, where 256 million shares traded hands. Trading volume was below the three-month daily average of 286.2 million on the Big Board.
Oil stocks gained as the price of crude traded near a 12-month high. Amoco Corp. rose 50 cents, to $60, and Mobil Corp. climbed 62.5 cents, to $85.125.
"There's a feeling that oil prices are going higher," said Michael Metz, chief market strategist at Oppenheimer & Co. Crude oil prices, which yesterday rose 5 cents a barrel, to $19.91, are up more than $5 a barrel since March 14.
Stocks opened lower when two economic reports raised concern that accelerating inflation will lead to higher interest rates.
The yield on the benchmark 30-year bond rose as high as 7.45 percent early yesterday after two economic reports raised concern that inflation might be a bigger problem than originally thought.
The Commerce Department said starts of new housing rose a greater-than-expected 2.6 percent in May. And the Labor Department said the number of Americans filing new unemployment claims declined last week to the lowest level since late April.
"There is so much news out there, and so much made of each piece, that some times things get overdone," said Paul Hennessey, head of equities trading at Boston Co.
Analysts and traders attributed part of yesterday's volatility in stocks to today's "triple witching," the simultaneous quarterly expiration of options on individual stocks, futures on stock indexes and options on index futures.
"The market's reaction to the passage of options and futures expiration will decide by how much risks are rising for the rest of the year," said Christine Callies, market analyst at Brown Brothers Harriman & Co.
Hanson PLC, American Power Conversion Corp., Exxon, Hasbro Inc. and Santa Fe Pacific Gold Corp. were the most active stocks in U.S. composite trading.
American Power rose $1, to $18.25. The maker of uninterruptible power supplies used for computers and electronic devices was raised to "buy" from "hold" at PaineWebber.
Hasbro Inc. fell $3, to $28.50. The toy maker's shares opened 10 percent lower yesterday as the company said it expects second-quarter revenue to fall as much as 15 percent from a year ago and wipe out its earnings for the period.