Nasdaq leads recovery try

NEW YORK (CNNMoney.com) -- Technology led a small stock advance Friday afternoon, as investors worked to recover after a three-day selloff that sent the Dow industrials down by more than 400 points, due to worries about inflation and rising interest rates.

The Dow Jones industrial average (up 33.00 to 13,299.73, Charts) added a few points with 3-1/2 hours left in the session, while the broader S&P 500 index (up 4.82 to 1,495.54, Charts) gained 0.2 percent and the tech-fueled Nasdaq composite (up 13.61 to 2,554.99, Charts) added 0.4 percent.

Stocks had tumbled for three sessions in a row as investors eyed surging Treasury bond yields, strong economic news and hawkish comments from both Federal Reserve officials and bond guru Bill Gross.

The developments had raised bets that the Federal Reserve may have to boost interest rates later this year, dashing hopes that the central bank might be able to cut rates.

The run up in bond yields also raised the threat of the Treasury market being a more competitive investment than stocks.

However, investors were also perhaps opting to step back following the big run-up stocks had seen over the last few months. That run had set the Dow and S&P 500 at all-time highs and the Nasdaq composite at 6-year highs.

"Stock traders had been looking for an excuse for a correction, traders were poised by the door, and when everyone saw bond prices falling off a cliff, they sold stocks," said Timothy Ghriskey, chief investment officer at Solaris Asset Management.

The three-day selloff had sent the Dow down 3 percent, the S&P 500 down 3.2 percent and the Nasdaq down 3 percent. After such a setback, investors were willing to make some tentative steps back in to the stock market Friday, with technology leading the way.

Stocks will probably rise for at least a few days, Ghriskey said, due to the ongoing supply of money into the system, from mergers and stock buybacks. However, he said that more volatility is probably on tap beyond that as investors look for a better sense of what the Federal Reserve might do later in the year.

Cisco Systems (up $0.48 to $26.33, Charts, Fortune 500), Oracle (up $0.22 to $18.95, Charts, Fortune 500), Intel (up $0.27 to $21.58, Charts, Fortune 500) and eBay (up $0.74 to $31.35, Charts, Fortune 500) were among the heavily-traded Nasdaq stocks rising.

General Motors (up $0.76 to $30.44, Charts, Fortune 500), Alcoa (up $0.44 to $39.37, Charts, Fortune 500) and McDonald's (up $0.73 to $50.94, Charts, Fortune 500) led the Dow's list of gainers.

McDonald's rose after the restaurant chain reported stronger-than-expected May sales at its restaurants open a year or more.

In addition, National Semiconductor (up $3.39 to $29.18, Charts) surged after reporting higher quarterly earnings that topped estimates late Thursday. The chipmaker also boosted its first-quarter revenue forecast and announced a $2 billion stock buyback plan.

On the downside, a variety of oil, metal and mining stocks declined, along with the price of the raw commodities.

Market breadth was positive. On the New York Stock Exchange, winners beat losers 8 to 7 on volume of 700 million shares. On the Nasdaq, advancers topped decliners 4 to 3 on volume of 950 million shares.

In other news, the April trade balance narrowed more than expected, the government said Friday morning. The trade gap narrowed to $58.5 billion from a downwardly revised $62.4 billion in the previous month, versus forecasts for it to narrow to $63.5 billion.

Treasury prices slipped, raising the yield on the benchmark 10-year note to 5.16 percent from 5.13 percent late Thursday, an 11-month high. Bond prices and yields move in opposite directions.

In currency trading, the dollar rose versus the euro and the yen.

U.S. light crude oil for July delivery fell 78 cents to $66.15 a barrel on the New York Mercantile Exchange.

COMEX gold for July delivery fell $13.50 to $651.70 an ounce.