Stocks ended higher in light holiday trading Monday as investors shifted their attention from inflation and interest rates to upcoming third-quarter earnings reports.
Stocks sensitive to the economic cycles, such as autos, papers and technology led the market higher as investors bet profit reports from those areas would be among the strongest.
The Dow Jones industrial average rose 23.89 points to 3,821.32, while in the broader market, rising issues outnumbered declines by about 2 to 1 on the New York Stock Exchange.
The Columbus Day holiday held down Big Board volume to a relatively light 213.21 million shares, down from 285.58 million on Friday.
At the same time, oil prices fell after Iraq appeared to have defused tensions in the Middle East by telling the United Nations it was withdrawing troops from its southern border with Kuwait.
On the New York Merc, November crude oil futures closed 27 cents lower at $17.99 a barrel after retreating from a high of $18.63 reached early in the day.
Prices climbed initially as a weekend build-up of Iraqi forces prompted Kuwait's western allies to send tens of thousands of soldiers to help protect the oil-rich Gulf emirate.
"The market was fairly sure that Iraq was just saber rattling. This appears to be confirmation," an oil trader in London said.
Stocks spent the day solidly higher, partly in a carry over from Friday's strong showing by the equity and bond markets. That came despite an upbeat September employment report and broke a three-day losing streak for the Dow average.
Friday's jobs report showed solid gains in employment but little wage inflation, allowing investors to focus on the prospect of good earnings without worrying about an immediate interest rate increase.
Investors worry that the Federal Reserve will feel compelled to raise rates for a sixth time this year in an effort to dampen growth and forestall inflation. Stock investors don't like rate increases, which mean companies pay more for money and make shares less attractive.
"Now that the threat of inflation and higher rates is receding, investors can look to earnings," said David Holt, director of technical research at Wedbush Morgan Securities.
The stock market is expecting solid third-quarter results, said Alfred Goldman, director of technical market analysis, with A.G. Edwards & Sons Inc. in St. Louis. Corporate reporting begins in earnest next week.
Analysts said the rally also was propelled by bargain hunting following last week's setback of 46 points in the Dow Jones index, which has been fed by the interest-rate jitters.
"The market's having a technical rebound after the decline of the last two weeks," said Bob Dickey, technical analyst at Dain Bosworth.
Meanwhile, prices of Treasury bond futures rose in light, abbreviated trading, strengthened by signs of a possible easing of tensions in the Persian Gulf that eased oil prices and soothed concerns among traders about possible inflation pressures.
The price of the 30-year bond for December delivery rose 7/32 of a point in futures trading, which ended at 1 p.m. Eastern time. The more widely followed U.S. cash market--bonds immediately available--was closed in observance of the Columbus Day holiday.
Among the market highlights:
* Semiconductor stocks were helped by favorable analysts' comments. Micron Technology Inc. jumped 1 7/8 to 35 1/8, boosted by upgrades from Goldman Sachs and SoundView Financial Group. Texas Instruments Inc., also upgraded by SoundView, rose 2 3/4 to 68 3/8.
* Intel Corp., which unveiled a Pentium chip for notebook computers, gained 1 to 60 7/16.
The strong showing by technology stocks meant the smaller capitalization Nasdaq index, which is heavily weighted in such issues, put in the best performance of the major market indexes, rallying 6.85 to 756.81.
* Scott Paper rose 3 1/4 to 64 3/4 on news that it was selling its S.D. Warren Co. unit to an investment group headed by a South African pulp and paper producer.
* Other paper producers rallied including International Paper Co., up 2 1/4 to 77 7/8, and Georgia-Pacific Corp., up 2 1/8 to 75 1/2.
Grupo Televisa tumbled 7 1/4 to 47 3/8 after Goldman Sachs cut earnings estimates for the company.
* Investors concentrated on the recently struggling auto stocks. General Motors Corp. rose 1 5/8 to 45 1/2, Chrysler Corp. gained 1 1/4 to 45 7/8 and Ford Motor Corp. was up 1 to 28 1/4.
* Apple Computer rose 1 7/8 to 38 7/8 on Nasdaq on reports that it may sell a stake to International Business Machines Corp. as part of a broader technology agreement.
Stocks were mixed overseas. The German DAX-30 share average shot up up 64.20 points, or 3.27% to close at 2,024.79. London's Financial Times 100-share average closed at 3,032.2, up 33.6 points. The Tokyo Stock Exchange was closed for Japan's Sports Day holiday.
However, Mexico City's Bolsa index fell 28.16 points to close at 2621.63.
The dollar closed at 100.35 Japanese yen and 1.545 German marks, down from 100.67 yen and 1.547 marks respectively on Friday.
At the same time, gold fell 20 cents to $390.70 an ounce on the New York Comex.
Market Roundup, D8