June 25 (Bloomberg) -- U.S. stocks advanced on prospects that General Motors Corp. will overcome demand for higher wages and after bond yields fell for a second day, easing concern about rising borrowing costs.
GM, the biggest U.S. automaker, climbed the most in the Dow Jones Industrial Average after Goldman, Sachs & Co. advised clients to buy the shares. Telephone companies and utilities rallied the most in the Standard & Poor's 500 Index as lower interest rates make their dividends more attractive.
The yield on the benchmark 10-year Treasury note fell 5 basis points to 5.08 percent, matching last week's low, as prices rose on speculation hedge-fund losses linked to subprime mortgage loans will fuel demand for safer government bonds. Stocks also got a boost from a drop in energy prices.
``As the price of oil continues to back off from $70 and the 10-year Treasury yields trade lower, it's a big positive for the market,'' said Robert Pavlik, who helps manage $325 million as chief investment officer of Oaktree Asset Management in New York. ``The fact that people are buying on the dip is encouraging.''
The S&P 500 Index added 9.84, or 0.7 percent, to 1512.40 as of 11:23 a.m. in New York. The Dow average increased 106.65, or 0.8 percent, to 13,466.91. The Nasdaq Composite Index rose 13.90, or 0.5 percent, to 2602.86.
U.S. stocks last week retreated the most since early March as concern intensified that banks will be saddled with losses on mortgage bonds.
General Motors
GM gained 82 cents to $36.28. Goldman upgraded GM to ``buy'' from ``neutral,'' saying the UAW may offer larger concessions to the automaker. Separately, people familiar with the matter said the United Auto Workers union will brief employees of GM's biggest supplier, Delphi Corp., today on a contract that ends the union's eight-year effort to keep pay and benefits the same as at GM.
Delphi spokesman Lindsey Williams and GM spokeswoman Renee Rashid-Merem declined to comment on specifics of the contract. Roger Kerson, a spokesman for the Detroit-based UAW, didn't return phone calls seeking a comment.
A gauge of telephone companies advanced 1.3 percent, while a measure of utilities rose 1.7 percent. Both industry groups have dividend yields of more than 3 percent, the highest among 10 industries in the S&P 500.
Home Sales
Sales of previously owned homes in the U.S. fell in May to the lowest in almost four years, reinforcing concerns about a protracted housing slump. Purchases last month declined 0.3 percent to an annual rate of 5.99 million from a revised 6.01 million in April, the National Association of Realtors said. The supply of unsold homes jumped to the highest in almost 15 years.
Weakening demand for existing homes, along with a decline in construction starts on new homes reported last week, makes the housing market the biggest threat to economic growth, economists said.
Energy shares in the S&P 500 fell 0.3 percent as a group. Crude oil for August delivery dropped 2 percent to $67.79 a barrel in New York after the end of a nationwide strike of oil workers in Nigeria eased concern supplies from Africa's biggest producer would be further disrupted.
Schlumberger Ltd., the world's biggest oilfield services provider, lost $1.94 to $87.26.
Bear Stearns Cos. declined $1.32 to $142.43. CIBC World Markets Inc. cut its price estimate for the shares by 12 percent to $159.
``We see tough headline risk and a lousy U.S. mortgage market in the coming three months,'' New York-based analysts at CIBC including Meredith Whitney wrote in a report dated June 24.
Bear Stearns, the second-biggest underwriter of mortgage bonds, last week offered $3.2 billion in loans to bail out one of its hedge funds, which lost about 20 percent this year because of bad bets on collateralized-debt obligations. CDOs are securities backed by bonds, loans, derivatives and other CDOs.
Nvidia Corp. dropped 51 cents to $43.11. Goldman cut its recommendation for the maker of graphics chips to ``neutral'' from ``buy'' and removed them from the bank's ``Americas Buy List.''
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