Bond Market Weathers Sunny Jobless Report : Market Overview
* Long-term Treasury bond yields tumbled Friday despite news of lower unemployment last month.
* The stock market lurched ahead slightly amid raised concerns about inflation and interest rates.
Credit
The bond market’s reaction to the improved employment picture prompted speculation that the market’s recent decline may be bottoming.
The Labor Department reported that the economy added 208,000 jobs in November as the unemployment rate dropped to 6.4% from 6.8% in October--the biggest one-month decline in a decade. Both numbers were stronger than economists had expected.
The yield on the Treasury’s key long bond fell to 6.23% from 6.28% on Thursday. Its price, which moves in the opposite direction, rose point, or about $6.56 per $1,000 in face value.
“All in all, the confirmation there was a sharp drop in the unemployment rate might have unnerved the market,” said Dana Johnson, head of market analysis at First Chicago Capital Markets in Chicago. “I’m surprised it didn’t unnerve the market more than it did.”
Ordinarily, news of economic strength tends to depress bond prices because stronger growth can aggravate inflation pressures. Higher inflation erodes the value of fixed-income securities.
But many bond traders had already anticipated the news of stronger growth, selling securities and pushing down prices in recent days, analysts said.
The federal funds rate, the interest on overnight loans between banks, was 2.938%, down from 3.063% on Thursday.
Other Markets
Most measures of stock activity stayed within narrow ranges throughout an ambivalent session. The Dow Jones industrials finished 1.96 higher at 3,704.07, which was 20.12 points above the week-ago level.
Broader measures fared a little better and advancing issues solidly outnumbered declines--by about a 7-to-5 margin--on the New York Stock Exchange.
Stocks were strongest on the Nasdaq market, where the composite index climbed 5.49 to 772.22 and rose 17.35 for the week.
Big Board volume was a moderate 267.778 million shares.
Dominating the market’s attention was the Labor Department’s unemployment report.
Stock investors were relieved that the bond market managed to shrug off any disappointment over the data.
It had been feared that more good economic readings would trigger a selloff in the bond market. Heavy bond selling drives up interest rates.
The stock market’s prolonged, record-setting advance has been built on low rates.
Among the market highlights:
Broderbund Software fell 5 1/2 to 41 3/4 after the software maker said it expects disappointing quarterly results.
* Other shares of networking companies posting gains included Cabletron, up 3 3/8 to 114 1/8, and Informix, up 1 5/8 to 20.
* National Medical Enterprises rose 3/4 to 12 1/2 after announcing it is selling some rehabilitation clinics to Healthsouth Rehabilitation for at least $300 million. Healthsouth advanced 3 1/4 to 20.
* On the Nasdaq, meanwhile, 3Com was active and jumped 7 1/8 to 42 7/8.
Stocks closed generally higher in overseas trading. Mexico’s IPC index soared 53.31 points to end at 2,324.09, a record high. Frankfurt’s 30-share DAX average finished up 10.08 at 2,120.61. In London, the Financial Times average ended 10.3 points higher at 3,234.2 and Tokyo’s Nikkei average closed up 0.60 at 17,459.35.
Elsewhere:
* Gold closed at $376.80 an ounce, up $3.00 on the New York Comex. Silver closed at $4.811 an ounce, up 19.8 cents.
* The dollar declined against most major currencies as traders sold the greenback to lock in profits following release of the employment report.
Market Roundup, D4
