Dow Achieves New High; Yields Rise
The stock market pulled up from a mild bout of morning selling on Wednesday to close mostly higher, with the Dow Jones industrials hitting a record high.
Meanwhile, bond yields rose slightly on economic news and on worries about Japanese interest rates.
On Wall Street the Dow added 18.06 points to a record 5,689.74, topping the previous high of 5,683.60, set March 18.
Most broader indexes also gained, with the Russell 2,000 index of smaller stocks also hitting a new high, up 0.84 point to 334.07.
But losers had an edge over winners on the Big Board in continued moderate trading.
Early in the day stocks took their cue from the bond market, where yields were pushed up by another batch of better-than-expected economic data.
Government reports on February personal income and spending data were robust enough to “set the stage for stronger [economic] growth in the second quarter and beyond,” said Joseph Liro, analyst for CIBC Wood Gundy.
Traders said U.S. bond yields also responded to comments by Bank of Japan Gov. Yasuo Matsushita in Tokyo on Wednesday. He warned that rising Japanese interest rates would be “natural” during an economic recovery.
Because many big investors worldwide have in recent years borrowed in Japan--at the world’s lowest rates--to invest in higher-yielding Treasury bonds and other securities, any rise in Japanese rates could put upward pressure on other countries’ yields as well.
“Japan led interest rates lower with deflationary monetary policy and now they could lead us up,” said David Knapp, a vice president at HSBC Securities in London.
Still, U.S. bond yields didn’t end the day significantly higher. The 30-year T-bond yield closed at 6.62%, up from 6.59% on Tuesday. The yield has slipped from 6.74% on March 15, after surging in February and early-March.
Many investors have been on the sidelines because of or in anticipation of the Easter and Passover holidays this week.
On Friday, stock markets will be closed but bonds will still trade. On Friday morning the government will report on March employment, a key economic number.
Analysts say that, despite the bond market’s jitters, the stock market’s strength suggests that investors are comfortable with the economy and are mostly looking ahead to first-quarter corporate earnings reports.
Among Wednesday’s highlights:
* IBM again led the Dow, rising 2 1/8 to 119 3/4. Many other tech shares also rallied. Xylan jumped 2 3/4 to 58 1/2, Dell Computer added 1 to 36 5/8, Seagate gained 3 to 58 1/2 and Intel rose 3/4 to 57 5/8.
* In the consumer sector, Avon Products surged 4 1/2 to 93 after it unveiled ambitious new-product plans and said first-quarter earnings should meet estimates. Other consumer winners included Philip Morris, up 1 3/4 to 92 1/8; Dial, up 7/8 to 29 3/8; and Clorox, up 7/8 to 88 1/8.
* Many airline issues were strong on earnings optimism. Alaska Airlines rose 1 3/4 to 29 3/4, Northwest Airlines jumped 2 7/8 to 52 7/8 and UAL, parent of United, soared 7 to 217.
In Tokyo, the Nikkei-225 stock index retreated from four-year highs on concerns about interest rates. The index fell 135.35 points to 21,464.73.
In U.S. commodities trading, grain futures prices surged anew, with corn closing at a record high as traders continued to respond to the tightest grain supplies in two decades.
At the Chicago Board of Trade, May corn surged 10 cents to $4.24 1/4 a bushel, surpassing the previous record of $4.19 1/4 set Nov. 28, 1980.
