Stocks Wilt on Rate Concerns; Yields Jump

Stocks managed slight gains Thursday as persistent concerns about interest rates and inflation wiped out any momentum from Wednesday’s dramatic turnaround.

The Dow Jones industrial average rose just 1.08 points to 5,475.14, giving up a gain of nearly 30 points as long-term Treasury bond yields again surpassed 7%.

The move back above that threshold muted a sudden dose of optimism that on Wednesday catapulted the Dow and other market measures to strong gains after a morning sell-off.

Some analysts attributed Thursday’s renewed weakness in bonds to concerns about a report due today on April inflation at the wholesale level, as well as to next week’s economic reports, including Tuesday’s figures on April consumer price inflation.

“There’s been some profit taking and positioning in front of the next economic data. There’s a fair amount of uncertainty,” said Dean A. Gulis, director of research for Roney & Co. in Detroit.

After hovering at 6.99% for most of the day, the yield on 30-year Treasury bonds--a benchmark used to set the rate charged on many types of loans--rose to close at 7.02%, up from 6.95% on Wednesday.

That took the steam out of stocks. Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange, where volume totaled 403.8 million shares, down from Wednesday’s pace.

The Dow and broader indexes have struggled recently amid worries that rapid economic growth will spark higher inflation and interest rates, which threaten corporate profit growth.

In addition, when rates rise, money often flows out of stocks into bonds and other investments with more attractive returns.

But smaller stocks again outperformed the blue-chip sector Thursday. The Nasdaq composite index rose 4.39 points to 1,187.82 and the Russell 2,000 index of smaller companies gained 2.44 points to 347.63.

Among Thursday’s highlights:

* Most of the Dow’s strength came on a surge in United Technologies, which rose 4 1/2 to 108 1/4--the equivalent of a 13-point gain in the blue-chip index.

* Sears added 1/8 to 50 3/4 after the big retailer reported strong sales in April. Wal-Mart Stores lost 5/8 to 23 5/8 after reporting a dip in sales, and other retailers had mixed results. Kmart fell 1/8 to 9 3/4, Dayton Hudson rose 2 1/4 to 96, J.C. Penney rose 3/4 to 50 and Ross Stores jumped 3 3/8 to 38 5/8.

* Morrison Knudsen gained 1 1/4 to 2 5/8 as the troubled engineering, construction and rail equipment company said it is in negotiations with potential strategic investors.

* Times Mirror added 1/4 to 41 5/8 after the parent of The Times boosted its quarterly dividend to 10 cents a share from 6 cents.

* America Online slumped 5 1/8 to 57 5/8, declining for a second day after warning that growth will slow in the current quarter.

Overseas, Tokyo’s Nikkei-225 average closed at its lowest level of the last month. The index lost 316.72 points to end at 21,411.88. London’s FTSE-100 closed at 3,728.3, a gain of 21.0 points.

In U.S. commodities trading, grain prices soared again as cold weather, flooding, tornadoes and hail in the Midwest threatened already battered winter wheat and stalled planting of corn, spring wheat and other crops.

At the Chicago Board of Trade, the May corn contract surged to an all-time high for the exchange of $5.10 1/2 per bushel and closed at $5.08, up 7 1/4 cents. That was up 85% from the $2.75 price at the same time last year.