Long-term interest rates jumped sharply Wednesday, amid cautious trading pending the release of statistics expected to show growth in the economy.
* The Dow Jones industrial average closed a fraction higher as the rise in interest rates cast a pall on the markets, especially the Nasdaq.
The rise in long-term rates was also linked to a jump in oil prices triggered by OPEC’s agreement to halt runaway production, which raised fears of inflation.
The yield on the key 30-year bond rose to 5.99% from 5.94% on Tuesday, while its price, which moves in the opposite direction, dropped 27/32 point, or $8.44 per $1,000 in face value. Activity was generally light as investors hesitated to make major purchases in the final days of the third quarter. Many portfolio managers were selling bonds in order to show quarterly profits for their funds.
Analysts traced some selling to a Conference Board report that newspaper help-wanted advertising volume rose in August, suggesting that the weak labor market is improving modestly.
Dana Johnson, head of market analysis at First Chicago Capital Markets in Chicago, said the report led to speculation that the closely watched report on September employment, due next Friday, will show significant job gains.
The bond market often reacts negatively to signs of economic growth, which can mean inflation and higher interest rates. Either can erode the value of Treasury securities and other fixed-income investments.
Another report, due out today, was expected to show a sharp rise in sales of new houses in August.
“With some numbers getting a little closer to release time, the market is backing off a bit,” said Kevin Flanagan, a money market economist at Dean Witter, Discover & Co.
The federal funds rate, the interest on overnight loans between banks, was 3.125%, up from 3.063% late Tuesday.
Stocks mostly followed bond prices lower, although a sharp rally in crude oil prices pushed energy-related issues higher. The Dow average managed a slim 0.28-point gain, to 3,566.30.
In the broader market, declining issues narrowly outnumbered advancing ones on the New York Stock Exchange. Volume on the floor of the Big Board came to 277.77 million shares, up from 243.36 million shares Tuesday.
The Nasdaq index slipped 0.49 to 763.17, breaking a four-session string of record closing levels.
Crude oil prices soared 71 cents to $18.67 a barrel on the New York Mercantile Exchange, after the 12-nation Organization of Petroleum Exporting Countries agreed in Geneva to hold down production in the final three months of the year.
The OPEC news pushed energy-related stocks higher. Chevron rose 2 1/2 to 97; Atlantic Richfield gained 4 1/4 to 116 1/8; Exxon shot up 1 to 6 5/8; USX-Marathon rose 5/8 to 19 5/8; and Schlumberger, the oilfield service company, jumped 2 3/8 to 66 3/8. Anadarko Petroleum jumped 5 1/8 to 47 3/8.
Semiconductor shares bore the brunt of profit-taking as the end of the third quarter neared.
Within the semiconductor group, Micron Technology slumped 4 3/8 to 55 3/8 and Advanced Micro Devices sank 1 7/8 to 28 1/8.
National Medical Enterprises rose 1 7/8 to 9 7/8. It reached a proposed settlement with three insurance companies to settle $740 million in disputed psychiatric claims.
In other markets:
* Gold for current delivery closed at $352.70 an ounce on the Comex, off $2.70 from Tuesday. Silver closed at $4.012 an ounce, down from $4.075 on Tuesday.
* The dollar was little changed against other major currencies as traders waited to see which direction the greenback would take since the Russian political situation has calmed.
Market Roundup, D8