Stocks Mixed, Withstand Big Jump in Bond Prices
NEW YORK (AP) _ Stocks withstood a big jump in bond market interest rates Thursday, ending mixed, with smaller and more speculative shares showing more strength as traders looked for ways to reinvest profits from blue chips.
The Dow Jones industrial average rose 14.16 at 6,437.10, ending a two-day losing streak that had erased about 100 points of the blue-chip barometer’s nearly 500-point November gain.
Broader measures were mixed, but little changed. The Nasdaq market rose for the eighth time in nine sessions, but for the second straight day, it was secondary issues rather than industry leaders that led the way.
Although the two-day tide of profit-taking slowed in stock trading, bonds fell sharply again as investors locked in more gains on the Treasury market’s broad advance in recent months.
As bond prices fell, the yield on the 30-year Treasury bond _ a key determinant of corporate and consumer borrowing costs _ shot up to 6.50 percent from late Wednesday’s 6.39 percent. The yield, which hit a nine-month low last week, hasn’t finished a day that high since Nov. 12.
Analysts attributed the continued profit-taking in bonds to a confluence of factors, including some more weakness in the dollar and inflation worries amid signs of stronger retail sales and growing consumer demand.
Bonds have been rallying in recent months, boosting stocks, on a flurry of data suggesting the economy has slowed enough to keep inflation under control without an increase in interest rates by the Federal Reserve.
``There is a greater sense that the economy could pick up a bit and inflation would pick up,″ said Eugene Peroni, director of technical research at Janney Montgomery Scott of Philadelphia. He said strong seasonal demand helped stocks avert a sharp drop as yields rose, but cautioned that ``if bonds continue to weaken, that will register more negatively on equities.″
There was limited market reaction to the day’s economic news. The Labor Department reported that workplace productivity fell 0.3 percent at an annual rate in the third quarter, far weaker than the 0.2 percent estimated gain reported last month.
The data was slightly worrisome coming a day before a key report on November’s payroll and wage levels. The monthly employment reading has revealed some moderation in the economy’s growth in recent months, but analysts remain concerned that a series of big increases in wage levels earlier this year. Without improving efficiency, businesses can’t increase wages without raising prices.
Fed policy makers are scheduled to meet again later this month to determine whether the economy’s pace remains modest enough to keep such inflationary pressures in check. Thus far, they have decided against an economy-slowing increase in the central bank’s key lending rates. Higher inflation or interest rates can hurt bonds by making fixed-income investments less attractive, forcing down prices to improve the yield.
Declining issues outnumbered advancers by a slim margin on the New York Stock Exchange, where volume totaled 483.60 million shares as of 4 p.m., down slightly from 493.70 million in the previous session.
The Standard & Poor’s 500-stock index fell 0.72 to 744.38, and the NYSE’s composite index fell 0.48 to 392.75.
But the Nasdaq composite index rose 3.10 to 1,300.12, just 0.25 shy of Tuesday’s record close. The American Stock Exchange’s market value index, which is also dominated by smaller and more speculative companies, rose 1.04 to 590.03.
Philip Morris rose 2 5/8 to 107 7/8 as the Dow’s biggest gainer, but most of the top performers in the blue-chip average were cyclical issues that might benefit from a stronger economy. Alcoa rose 1 7/8 to 64 3/8 and DuPont rose 1 7/8 to 97 7/8.
The Dow’s energy components also rose as crude prices jumped in futures trading on worries that a French oil workers strike and U.S. refinery outage threatened to squeeze supplies. Texaco rose 1 1/4 to 100 3/8, Exxon rose 1 1/8 to 95, and Chevron rose 5/8 to 65 3/4.
The leaders of last month’s Dow rally gave up more ground to profit takers. IBM fell 3 1/2 to 158 1/2, and General Electric fell 1 9/32 to 97 5/8.
Overseas, Tokyo’s Nikkei stock average rose 1.4 percent, Frankfurt’s DAX index rose 1.5 percent, and London’s FT-SE 100 rose 0.1 percent.