NEW YORK -- U.S. stocks closed higher yesterday as a rally in casino and consumer issues offset slumping technology shares and the dollar and bonds steadied.
Trading was slow before the three-day Fourth of July weekend. A last-minute round of computer-guided buy orders added about 10 points to the Dow Jones industrial average, Birinyi Associates said.
"Initially, it was recovery in the dollar which gave a boost to the bond market and supported stocks, but there was no buying conviction whatsoever," before next week's meeting of the Federal Reserve Board's policy council, said Robert Walberg, equity analyst at MMS International in Chicago.
The Fed will probably raise rates for overnight bank loans by a quarter- to half-point, from 4.25 percent, Mr. Walberg said.
The Dow Jones industrials rose 21.69, to 3,646.65, as Aluminum Co. of America, International Paper Co. and Coca-Cola Co. advanced, after climbing earlier by 25.58. For the week, the index added 9.71 points.
Among broader market indexes, the Standard & Poor's 500 Index rose 1.93, to 446.20, after seeing a gain of as much as 2.18. Oil, soft drink, retail, electric utility and financial companies posted the largest gains.
The Nasdaq composite index rose 0.89, to 706.85, as gains in MCI Communications, Amgen Inc. and Snapple Beverage Corp. overshadowed declines in technology stocks such as Microsoft Corp., Novell Inc., Apple Computer Inc. and Legent Corp.
More than four stocks rose for every three that declined on the New York Stock Exchange, where trading volume slowed to 199 million shares, the lowest since early February.
"Higher rates are coming" before the end of the summer, "but the fundamentals of the economy don't warrant a bear market or a major decline," said Alfred Kugel, chief investment strategist at Stein Roe & Farnham in Chicago.
A National Association of Purchasing Management report yesterday could have fueled concern about rising inflation and interest rates, said David Butler, head equity trader at Kemper Financial Services in Chicago.
The NAPM report showed that the June prices-paid component of the monthly index -- a closely watched inflation indicator -- rose to 75.50, the highest since 1988, from 71.50 in May. The report also said the index of manufacturing dropped slightly, to 57.5 percent in June from 57.7 percent.
The benchmark 30-year U.S. Treasury bond dropped 1/32, leaving its yield unchanged at 7.61 percent.
Other economic reports, though, gave mixed signals. A University of Michigan consumer sentiment index for June dropped to 91.2 from 92.8 in May. At the same time, U.S. construction spending gained 0.9 percent in May.
The dollar appeared to stabilize after falling to successive post-World War II record lows against the Japanese yen each of the past three days. The dollar steadied against the yen and advanced against the German mark as traders looked to the Group of 7 leading industrialized nations to adopt measures to support the currency.
The G-7 holds its annual summit meeting in Naples, Italy, next weekend.
Stocks also got a little help from renewed merger and acquisition activity. The value of mergers announced in the first half of the year rose about 3.8 percent from 1993 because of five transactions announced Thursday. Mergers rose to about $212 billion in the first six months of 1994, from $204.1 billion a year ago.
Casino stocks rallied after the Wall Street Journal reported that Bally Entertainment Corp. filed an application with the Federal Trade Commission to buy as much as 25 percent of Circus Circus Enterprises.
Circus Circus shares climbed $4.50, to $26; Bally rose 25 cents, to $6.875; Caesars World rallied $3.25, to $39.50; MGM Grand Inc. added 87.5 cents, to $24.25; and Showboat Inc. gained 50 cents, to $17.25.
Consumer-oriented stocks that do relatively well when the economy slows gained amid concern about higher rates next week.
Among drug stocks, Merck & Co. added 25 cents, to $30, and Schering-Plough gained $1, to $62.25. Soft drink maker Coca-Cola advanced $1, to $41.625. Detergent and soap makers Unilever NV climbed 37.5 cents, to $101.125, and Procter & Gamble Co. increased 75 cents, to $54.125.