Stocks rose today as the dollar showed renewed signs of strength against the Japanese yen. As the dollar extended its recovery from the 3 1/2-year low reached Wednesday, it boosted the bond market, which enticed investors back into bank and brokerage stocks.
The Dow Jones industrial average rose 66.17 points to close at 10,803.63, erasing its 63-point loss on Thursday. For the week, however, the average was down 224.80 points, a loss of 2 percent.
Broader stock indicators also closed higher today. The Standard & Poor's 500-stock index rose 16.94, to 1335.42, and the Nasdaq composite index surged 62.90, to 2869.62.
Stocks benefited from the rising dollar. The U.S. currency, which on Wednesday sank to 104.68 yen, bought 107.15 Japanese yen in late New York trading today, up from 105.24 on Thursday.
The dollar has struggled against the yen in recent months amid a recovery in the Japanese economy.
Investors fear a weaker dollar because it makes imports more expensive, setting the stage for a rise in inflation in the United States. A falling dollar also can encourage foreign investors to pull out of U.S. stocks to seek more attractive returns elsewhere.
"If foreigners get worried about the dollar depreciating, they are more inclined to not invest in U.S. securities or will even shift money out of the United States," said Anthony O'Bryan, a market analyst at A.G. Edwards & Sons in St. Louis. "So a rising dollar clearly helps investor sentiment."
Japan's government, meantime, worries that a very sharp rise in the yen will cut short the country's recovery from a deep recession by making Japanese goods too expensive to compete on world markets.
The rising dollar helped the bond market rebound today. The price of the Treasury's benchmark 30-year bond rose $4.06 per $1,000 invested, and its yield fell to 6.04 percent from 6.07 percent late Thursday.
"The improvement in the bond market helped everything that depends on interest rates," said Barry Hyman, senior equity analyst at Ehrenkrantz King Nussbaum. That included financial-services companies such as American Express, which rose 3 3/8, to 139 7/8, the strongest performer in the Dow.
Morgan Stanley Dean Witter rose 4-5/16, to 91-7/16.
Gains in a wide range of technology stocks also supported the market. Microsoft gained 2-11/16, to 96-7/16; Cisco Systems advanced 3, to 73 1/2; and Sun Microsystems rose 4, to 88-11/16.
Adobe Systems jumped 7 1/8, to 105, after reporting that it earned 80 cents a share in its fiscal third quarter, beating analysts' estimates of 74 cents a share.
But the Dow's two technology powerhouses fell steeply. IBM fell 4 5/8, to 125 3/8, after a Merrill Lynch analyst issued a cautious forecast for the company's revenue growth. Analyst Steve Milunovich said he expects IBM's hardware sales to increase only 4 percent from a year ago, down from a previous estimate of 6 percent growth.
Hewlett-Packard fell 3 1/8, to 100-13/16.
Solid gains from General Electric, up 2 3/4 to 120, and 3M, up 2-3/16 to 98 1/4, helped the Dow move higher.
Advancing issues outnumbered declining ones by 4 to 3 on the New York Stock Exchange, where volume totaled 862 million shares, up from 739 million on Thursday. Volume was higher because today was a "triple-witching" session, a once-a-quarter session when contracts on stock options, index options, and index futures all expire.