FINANCIAL MARKETS : Short-Term Bond Yields Rise; Stocks Do Too
Shorter-term bond yields rose sharply for the second day Friday after a January uptick in the prices of unfinished goods indicated inflation is still a concern--and gave rise to renewed fear of another hike in interest rates by the Federal Reserve Board.
Meanwhile, U.S. stocks posted modest gains in a sedate session, with technology and airline stocks doing particularly well.
In the bond market, the two-year Treasury note yield rose to 7.31% from 7.24% on Thursday and 7.14% on Wednesday. The Treasury’s newest 30-year bond yield rose much less dramatically, to 7.66% from 7.65% at auction Thursday.
Bond investors concluded that inflation may still be high enough to warrant further interest rate tightenings after the Labor Department said Friday that prices for intermediate and crude goods rose a full 1% in January. But overall, wholesale inflation for all goods rose a slight 0.3% in January.
Still, some market players said dealers were so saddled with Treasury securities from the $40-billion government refunding this week that they were willing to push yields higher to make the issues more acceptable to investors.
As for stocks, Edward Collins, head block trader at Daiwa Securities America, said the inflation report “was a little confusing” and didn’t give investors much of a reason to do anything. He noted that the market has been running out of steam after soaring last week.
There was plenty of life left, however, in technology stocks, which extended earlier gains after the semiconductor industry reported a healthy increase in January order rates.
The Dow Jones industrial average rose 6.39 points to 3,939.07 after hovering close to unchanged for most of the session. The blue-chip index remains within sight of its all-time high of 3,978.36, reached Jan. 31, 1994.
Advancing issues led decliners by about 4 to 3 on the NYSE.
Among Friday’s highlights:
* Among technology stocks, LSI Logic gained 2 1/8 to 52 1/8, Micron Technology rose 2 1/4 to 52 5/8, Adobe Systems shot up 3 to 32 and Motorola edged up 3/4 to 62 1/4.
Also, the initial public offering of General Magic rocketed 13 5/8 to 26 5/8 on Nasdaq. The Sunnyvale, Calif.-based company’s software makes it easier to use electronic mail, faxes and voice messages.
* Airline stocks rallied after two more carriers followed Delta Air Lines in setting limits on commissions they will pay travel agents for booking domestic tickets.
Delta soared 4 to 56 3/4, American Airlines parent AMR rose 3 to 60 1/4, Northwest Airlines gained 1 7/8 to 21 and United Airlines parent UAL zoomed 5 1/4 to 97.
