Blue Chips Climb, but Tech Stocks Falter

Blue chip stocks rose Wednesday--giving the Dow Jones industrial average its first two-day advance in nearly a month--as investors again searched for bargains after weeks of declines. But tech stocks were left behind, falling in response to two disappointing economic reports.

Despite the Dow’s advance, the session had a cautious tone, reflecting investors’ persistent doubts about the strength of the economy.

“The market is trying to come back as some investors look at it as oversold. But this is nothing more than a bear market rally,” said Christopher Johnson, managing quantitative analyst at Schaeffer’s Investment Research in Cincinnati.

The Dow closed up 113.41 points, or 1.1%, at 10,059.63, recovering from an early 115-point drop. The index, which rallied 126 points Tuesday, hadn’t risen for two straight sessions since April 4-5.

The broader market finished mixed, however. The Nasdaq composite index shed 10.70 points, or 0.6%, to 1,677.53, steadying after an early 45-point loss. The Standard & Poor’s 500 index advanced 9.54 points, or 0.9%, to 1,086.46.

Winners led losers by 3 to 2 on the New York Stock Exchange, but decliners led by a narrow 10-9 margin on Nasdaq. Trading was active.

The early sell-off came on disappointing economic news, including a report that said manufacturing activity grew at a slower-than-expected pace in April. Another report said construction spending dipped 0.9% in March because of a decline in big government projects.

Investors did have some positive news to chew on. Dow component Procter & Gamble rose $1.54 to $91.80 after the consumer goods maker reported fiscal third-quarter earnings a penny higher than analysts had anticipated. Shoe designer Kenneth Cole, whose profit also beat expectations by a cent, climbed $1 to $28.

Technology was the weak spot, which has been the case during much of the recent sell-off and which isn’t surprising given that tech companies are expected to be the last ones to emerge from the recession. Sun Microsystems was a major drag on the sector, falling $1.21 to $6.97 after another key executive resigned.

Among other tech leaders, Cisco Systems slid 95 cents to $13.70 and Broadcom dropped 88 cents to $33.62, but Microsoft rose 49 cents to $52.75.

Meanwhile, the dollar declined to a six-month low against the euro and slipped against the yen, oil prices fell 2% and gold ticked up.

In other market news:

* Treasury bond yields fell for the seventh day in the last eight on the weak economic news and a reduction in the amount of government debt expected to be sold next week. The yield on the benchmark 10-year Treasury note slipped to 5.06% from 5.09% on Tuesday. It stood at 5.20% on April 19.

* GM gained $1.36 to $65.51 after the company said incentives helped fuel strong consumer demand for its pickups and sport utility vehicles. Ford rose 34 cents to $16.34 and DaimlerChrysler advanced 91 cents to $46.55.

* Software firm Peregrine Systems fell $3.40 to $3.45--a 50% loss--after the firm delayed the release of its quarterly results because its new auditors need more time to complete work taken over from Arthur Andersen.

* Home builder stocks continued their seven-month run. KB Home rose $1.70 to $51.55, while DR Horton gained 51 cents to $26.31. The Bloomberg index of home builder stocks added 2%.

* Among multinational consumer stocks, Coca-Cola helped power the Dow’s gain, rising $2.11 to a 52-week high of $57.62. Rival PepsiCo jumped $1.02 to $52.92 after raising its quarterly dividend 3.4%, to 15 cents a share. And Philip Morris rose 95 cents to $55.38, its highest since December 1998. A weaker dollar can help multinationals by making their foreign sales worth more.

Market Roundup, C6-7