Stock Rebound Continues

Wall Street advanced for a second consecutive session Tuesday as oil prices continued to slide and United Technologies reported strong earnings.

Small-company stocks, which have led the market for most of this decade, saw heavy buying again Tuesday, lifting the Russell 2,000 small-stock index 1.4% to a record high.

Also hitting all-time highs were the Standard & Poor’s small-stock index and the Dow transportation average.

Blue-chip indexes, by contrast, were up modestly.

The Dow Jones industrial average added 23.45 points, or 0.2%, to 10,712.22, and the Standard & Poor’s 500 index rose 3.04 points, or 0.2%, to 1,266.86.

The technology-dominated Nasdaq composite gained 16.78 points, or 0.8%, to 2,265.25.

Winners topped losers by about 2 to 1 on the New York Stock Exchange and on Nasdaq. Trading was active.

The market fell sharply Friday as oil prices reached their highest levels since Sept. 1 on worries about potential supply interruptions from producers including Nigeria and Iran. The Dow slid 213 points, or 2%, on Friday, its biggest one-day percentage decline since May 2003.

But crude oil futures eased 38 cents a barrel Monday and slid $1.04 on Tuesday, ending at $67.06 in New York. Traders said there was growing confidence that U.S. supplies were sufficient to meet demand in the near term and that Iran was unlikely to curb exports because of a dispute with the United States over nuclear research.

“If we were closer to $60 than $70 a barrel on oil at the end of the week, I think that would definitely help the market,” said Richard Sichel, who oversees $1.5 billion as chief investment officer of Philadelphia Trust Co.

United Technologies underpinned the Dow on Tuesday. The stock jumped $1.98 to $56.45 after the company reported fourth-quarter profit that beat analysts’ consensus estimate. Net income was up 2% to $626 million. Sales and profit rose at all six of the diversified company’s divisions.

Disappointing quarterly results from General Electric and Citigroup on Friday had contributed to the market sell-off.

But many analysts say earnings overall are looking reasonably strong. So far, 63% of the 130 S&P; 500 companies have reported results surpassing analysts’ estimates.

Stocks were undisturbed by higher Treasury bond yields, which rose after a sale of 20-year inflation-protected debt met mediocre demand, and as some traders worried about the Federal Reserve’s meeting next Tuesday. The central bank is expected to raise its benchmark short-term rate from 4.25% to 4.5%.

The 10-year T-note yield ended the day at 4.39%, up from 4.36% on Monday. Bond yields rise as their prices fall.

Some Wall Street pros warned that despite the stock market’s recovery this week, a bigger sell-off may loom.

“The choppiness we’ve had over the past couple weeks, the volatility, suggests stocks are vulnerable,” said Jon Brorson, head of growth equities at Neuberger Berman in Chicago. “It suggests we’re looking, in the months ahead, at a correction in the marketplace.”

In other market highlights:

* Among Dow stocks, McDonald’s hit a 5 1/2 -year intraday high of $36.31 before retreating to $35.85, up 14 cents, after fourth-quarter profit rose 53% on continuing strong sales at the world’s largest restaurant company’s U.S. outlets and improving results in Europe. Same-store sales, or those from restaurants open more than a year, rose 4.2% in the quarter.

* Another gain in battered General Motors shares also helped the Dow. GM rose $1.20 to $23.05. It is up 18.7% this year. Ford, which on Monday announced a far-reaching restructuring, added 8 cents to $8.40.

On the downside, Johnson & Johnson dropped $1.83 to $59.36 after the healthcare products maker posted higher quarterly profit but said sales fell 1%.

And 3M reported a solid fourth-quarter profit but failed to meet analysts’ expectations. The stock fell $1.50 to $74.20.

* Lexmark International, the No. 2 printer maker in the U.S., jumped $5.18, or 11%, to $51.08 for the second-biggest gain in the S&P; 500. The company said fourth-quarter net income was 71 cents a share. In October it had forecast profit of 40 cents to 50 cents.

* Coach surged $2.82 to $34.89. The luxury-goods retailer boosted its fiscal 2006 profit forecast to at least $1.33 a share, excluding option costs, from at least $1.28.

* Transportation shares rallying as oil prices fell included railroad Burlington Northern, up $3.17 to $74.80; trucking firm YRC Worldwide, up $1.83 to $48.99; and Continental Airlines, up $1.18 to $19.17.

* Many commodity-related shares continued their new year’s rally. Iron ore miner Cleveland-Cliffs soared $6.96 to a record $101.20. Aluminum China gained $1.15 to $87.90 and fertilizer company Potash was up $3.04 to $85.85.

* Steel stocks also were broadly higher. U.S. Steel jumped $4.14 to $55.74, Nucor rallied $3.43 to $75.83 and Steel Dynamics gained $3.94 to $41.75.

* In the tech sector, Texas Instruments slid $1.01 to $30.69 on disappointment over its quarterly profit report. But many other chip-related stocks rallied. Broadcom gained 84 cents to $57.72, Advanced Micro Devices rose $1.30 to $36.77 and Teradyne rose 66 cents to $16.96.

* Tokyo’s stock market continued to rebound, with the Nikkei-225 index up 1.9%. Mexico’s main index rose 2.3% and the Brazilian market was up 2.1%.