Yields’ Surge Drags Stocks to Mixed Finish
Stocks struggled to a mixed finish Thursday, weighed down by weakness in the bond market as some surprisingly strong economic readings undermined confidence about steady inflation and interest rates.
But the Nasdaq market and other indexes dominated by smaller and more speculative shares outperformed the blue chips and set new records as investors continued to shop for bargains in a pricey market.
The Dow Jones industrial average gained 9.61 points to 5,635.05 as last week’s sharp rebound continued to sputter.
Broader measures dominated by larger companies retreated from modest gains as the yield on the 30-year Treasury bond, a benchmark used to determine the interest charged on most loans, jumped over 6.92% from 6.85% on Wednesday.
“Interest rates are still competitive for the stock market and suggest generally that equities are overpriced,” said Michael Metz, vice president at Oppenheimer & Co.
But, he said, “the market’s underpinning is still firm despite the retreat in the bond market. There’s still universal optimism” that the economy is growing at a healthy pace. “Whether these expectations prove justified is another matter.”
The Commerce Department reported Thursday that construction of new homes and apartments unexpectedly shot up 5.9% in April to 1.52 million. Forecasters had expected a 1.4% decline because of the recent increase in mortgage rates.
Separately, the Labor Department said new claims for jobless benefits rose by 12,000 to 352,000 last week. But the four-week moving average, which smooths out weekly irregularities, fell to 353,000, the lowest since September.
Bonds slid even further in the afternoon after Lockheed Martin flooded the market with a $3.5-billion corporate debt issue that created worries about demand for Treasury securities.
Declining issues outnumbered advancers on the New York Stock Exchange. The NYSE’s composite index fell 0.23 to 356.41, ending a streak of three record highs. The Standard & Poor’s 500-stock index fell 0.57 to 664.85.
The Nasdaq composite index rose 5.75 to 1,239.31, closing at a record high for the fourth time in five sessions.
Among market highlights:
* Technology shares slumped as Hewlett-Packard, down 8 1/2 to 105 1/4, reported lower-than-expected first-quarter earnings. IBM fell 3/8 to 108 5/8, Digital Equipment lost 3/8 to 56 3/8 and Compaq fell 3/8 to 47 1/4.
* Oil stocks weighed down the Dow industrials as crude prices slumped in commodities trading amid expectations of new supplies from Iraq. Texaco fell 1 1/8 to 82 1/8 and Exxon lost 3/4 to 83 7/8.
* Chrysler rose 2 1/4 at 67 1/8 after announcing a 2-for-1 stock split and a 16% increase in its quarterly dividend. General Motors’ announcement that it is moving its headquarters sent shares up 3/8 to 55 1/2.
* Boeing was up 1 at 82 3/8 on news that Taiwan’s China Airlines ordered eight 747-700 jumbo jets worth $1.4 billion.
* Upscale jewelry retailer Tiffany & Co. surged 2 3/4 at 76 1/2 after it said it will split its stock 2 for 1 and raise its quarterly dividend 43%.
In the commodities markets, oil prices dropped sharply as a deal to allow limited new sales of Iraqi oil appeared closer. At the New York Mercantile Exchange, June crude oil ended down 70 cents a barrel at $20.78.
Meanwhile, overseas, the dollar dipped 106.65 yen in New York, from 106.96 Wednesday, after two days of gains.
Tokyo’s Nikkei surged by more than 700 points, closing up 3.54% and London’s FTSE-100 index ended 16.5 points higher at 3,776.2.
Mexico City’s Bolsa closed down slightly, falling 0.183%, or 5.93 points to 3,226.21 points.
