STOCKS : Dow Up 10.51; ‘Bargain’ Prices Trigger Rally

Stocks snapped a five-session losing streak Tuesday, ending higher as bargain hunters picked up recently battered issues.

The Dow Jones industrial average finished up 10.51 points at 2,985.91. Most broader indexes showed better gains.

Advancing issues outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 865 issues rising, 693 declining and 506 unchanged.

Big Board volume came to 161.61 million shares, up from 127.72 million in the previous session.

The Dow had fallen five straight sessions starting last Tuesday, a day after it had reached a record high close of 3,035.33.

Tuesday the index was up as much as 27 points, but the rally lost its spring after computer-driven selling hit in the afternoon.

“What the buy programs gave us in the morning, the sell programs took away in the afternoon,� said Dennis Jarrett, chief market analyst at Kidder, Peabody & Co.

Traders and analysts said the market’s rise also was limited by continuing worries over interest rates. “Even when we were doing well, we never saw the enthusiasm you would expect to see if there were going to be a strong rally,� Jarrett said.

Investors have been wary of making major moves in advance of two key inflation reports due out later this week. The Labor Department will release its producer price index Thursday and its consumer price index Friday.

Among the market highlights:

* Many industrial issues sprang back to life after last week’s profit taking. Monsanto gained 2 to 65 3/4, Emerson Electric rose 1 to 48 3/8, W.R. Grace added 7/8 to 33 3/4, and Ford jumped 1 1/2 to 35 3/4.

* Health-care stocks also were strong, after their recent drubbing. Merck gained 1 1/4 to 115 1/2, Schering-Plough rose 1 to 50 7/8, PacifiCare Health jumped 2 to 33, and Summit Health rose 1/4 to 4 1/2.

National Medical Enterprises climbed 2 1/8 to 44 5/8. A Salomon Bros. analyst said the hospital company would be able to continue good earnings gains despite a Medicare proposal to regulate payments for outpatient services.

* Apple Computer fell 1 3/8 to 44 5/8. Montgomery Securities downgraded the stock, saying it should underperform the market in the near future because of distribution and currency pressures.

Another tech loser was Chatsworth-based disk-drive maker Micropolis, skidding 1 1/2 to 9 1/4. Analysts have recently cut earnings estimates.

* Sherman Oaks-based House of Fabrics jumped 1 3/4 to 24 5/8 on a strong May sales report by Fabricland, which House of Fabrics plans to acquire.

* Santa Monica-based Quarterdeck Office Systems, a software producer, went public at 10 and closed at 12 1/8 in strong demand.

* Maxxam fell 1/4 to 46 3/4. Late in the day, the company’s Kaiser Aluminum unit said it repriced its proposed public offering of stock to an anticipated range of 15 to 17 a share, down from the 20 to 22 the company originally hoped to get.

* Readers Digest rose 1 1/4 to 34 1/2. A secondary public offering of the publishing company’s stock by a group of 10 shareholder associations was priced at 33 1/4 a share.

* Columbia Gas fell 2 1/8 to 37 3/4. Prudential Securities downgraded its opinion of the company’s prospects because of an oversupply of natural gas. Meanwhile, Xerox jumped 2 1/4 to 54 3/8 after Prudential recommended the stock, saying Xerox’s earnings had remained steady despite the recession.

Overseas, markets were far stronger. London’s Financial Times 100-share average rocketed 30.7 points to 2,542.6.

In Frankfurt, the 30-share DAX average also rose, gaining 10.88 points to 1,715.80.

In Tokyo, the Nikkei average rose 64.21 points to close at 24,662.59.

Meanwhile, Mexican stocks fell in profit taking, as the Bolsa index dropped 20.18 points, or 1.8%, to 1,098.43. But in Brazil, the Bovespa index shot up 6.8% to a new record 12,323.

Credit

Bond prices were mostly unchanged in light trading.

The price of the Treasury’s bellwether 30-year bond didn’t move, and its yield was unchanged from late Monday at 8.47%.

Traders bought securities in morning trading at low prices after a large selloff in recent days. That pushed up prices on the 30-year bond, before prices fell back.

The federal funds rate, the interest on overnight loans between banks, was quoted at 5.69%, unchanged from late Monday.

Currency

The dollar ended narrowly higher against most major currencies in quiet trading motivated largely by technical factors.

Currency dealers said trading was quieter than Monday, when at least 10 European central banks and the Bank of Japan sold dollars for Japanese yen in Europe to control the American currency’s rise. Concerns about the Japanese economy were largely responsible for the yen’s selloff.

In the New York, the dollar rose to rose to 1.773 German marks from 1.767 late Monday, while it fell to 141.25 Japanese yen from 141.55 on Monday.

Commodities

Wheat futures rose strongly on the Chicago Board of Trade ahead of a government report that confirmed perceptions of a shrinking U.S. winter wheat crop.

Wheat futures settled 1 cent lower to 5.50 cents higher, with the contract for delivery in July at $2.98 a bushel.

Elsewhere, precious metal futures retreated on New York’s Commodity Exchange amid profit taking after a four-day rally that pushed gold to a four-month high on Monday.

Gold settled $2.70 to $3.10 lower, with June at $370.90 an ounce; silver was 4.6 to 5.5 cents lower, with July at $4.51 an ounce.

On the New York Merc, light, sweet crude oil for delivery in July settled at $19.96 per barrel, up 12 cents. Throughout the session, crude for next-month delivery stayed below the $20 threshold it had crossed just a day earlier for the first time since early April.

But following the market’s close, the American Petroleum Institute reported that U.S. stocks of crude oil climbed sharply last week, with gasoline inventories also rising.

Market Roundup, D6