FINANCIAL MARKETS : Plunging Yields Help Lift Stocks; Oil Prices Slide
Bond yields pulled back sharply Friday from eight-month highs, helping stocks recover, as oil prices sank and economic data suggested no serious problems with inflation.
But many traders warned that the beleaguered stock and bond markets may just have benefited from a “technical” bounce, after being hammered all week.
On Wall Street the Dow Jones industrials gained 45.52 points, or 0.8%, to 5,532.59, following on Thursday’s rebound that saw the Dow recover from a 70-point midday loss to end up 1.09 points.
In the broad market Friday, most indexes rose with the Dow, and winners topped losers by 2 to 1 on the Big Board in moderate trading.
In the bond market yields fell across the board in a strong rally, with the 30-year Treasury bond yield dropping from 6.93% on Thursday to 6.80%, lowest since April 4.
Worries about surging commodity prices and the economy’s surprising resilience had sent yields soaring early in the week, but on Friday some investors saw good news in fresh government data.
Although consumer inflation was higher than expected for March, monthly surveys on retail sales, consumer confidence and manufacturing eased concern that inflation will accelerate further this year, analysts said.
“The data supports the idea that the economy looks slightly weaker,” argued John Fath, trader at NationsBanc Capital Markets.
Some bond investors also were relieved to see oil prices tumble. May crude oil futures on the New York Merc fell $1.05 to $24.29 a barrel after surging earlier in the week. Iraq and the United Nations are negotiating a deal to bring Iraqi oil back on the market soon.
But in other commodities trading, grain prices continued to rise Friday on fresh concerns about poor weather in the Midwest.
For the stock market, the decline in bond yields was enough to bring in buyers, traders said. But some analysts warned against reading too much into one day’s recovery. The Dow still lost 150.29 points for the week, or 2.6%. Friday was “strictly a technical bounce,” said Larry Rice, analyst at Josephthal, Lyon & Ross.
Even so, analysts point out that there are some positive undercurrents in the stock market. Smaller stocks, for example, have held up much better than blue chips lately. The Russell 2,000 index of small stocks lost 1.1% for the week.
And many foreign markets closed higher for the week despite Wall Street’s problems. Gainers included Argentine, Mexican, German and Taiwanese stocks.
Among Friday’s highlights:
* Retail stocks led the rally, thanks to strong March sales at many chains. Sears jumped 3 1/8 to 52, Dayton Hudson soared 4 3/4 to 91 3/8, Federated Department Stores climbed 1 3/4 to 33 3/4 and Ross Stores leaped 3 7/8 to 34 1/2.
* Battered financial-related issues also recovered. Wells Fargo gained 5 1/4 to 251 1/2, BankAmerica jumped 2 1/8 to 75 1/8 and J.P. Morgan added 2 to 79 1/8.
* Technology issues were mixed. The market gave a rousing reception to Internet-related new issue Yahoo!, which soared from 13 to 33. But IBM lost 6 to 111 1/2 on concerns about its first-quarter profit report, due next week.
Indeed, the barrage of earnings reports expected next week could set the tone for the market’s near-term performance, analysts say.
Market Roundup, D4
