Stocks Mostly Higher; Bond Yields Increase
Stocks edged mostly higher near the close Tuesday, holding steady against rising interest rates in the bond market and some profit taking on a two-day rally in blue-chip shares.
The Dow Jones industrial average fell 6.66 points to 5,727.18, with investors securing some profits from a combined 125-point jump on Friday and Monday. That 2.2% advance had put the barometer of 30 big U.S. companies within 45 points of its all-time high at 5,778.00, set in late May.
Broader measures turned mostly higher by the close, but the market’s moves were restrained by growing caution before some key readings on inflation due later this week.
“The bulk of the market is stepping back and saying, ‘Maybe I’ll take a little money off the table and see what’s going to happen with the inflation numbers,’ ” said Robert Froehlich, chief investment strategist at Van Kampen American Capital in Oakbrook Terrace, Ill.
Stocks were pressured throughout the day by the bond market, where prices fell after two strong sessions.
Analysts said the market’s bullish tone in the wake of Friday’s August payrolls report, which allayed Wall Street’s worst inflation fears, was dampened by Fed Gov. Janet Yellen’s comment that the economy was at a critical point.
“We’re in an inflationary danger zone,” Yellen told Reuters in an interview. “There’s definitely a chance inflation will rise.”
Her cautious comments suggested that she might be willing to support a small, quarter percentage point rise in short-term interest rates at the Fed’s next policy-making meeting on Sept. 24 to help ensure against higher inflation.
Such a move, if it occurred, would be the first rate rise by the central bank in about 1 1/2 years and would be designed to head off a rise in inflation that could jeopardize the 5 1/2-year-old economic expansion.
The inflation-sensitive bond market fell, with the 30-year Treasury bond off nearly half of a point, and its yield, which moves in the opposite direction to its price, up to 7.11% from Monday’s close of 7.06%.
There was little market reaction to a report showing that workplace productivity rose at a 0.5% annual rate in the April-June quarter.
Advancing issues outnumbered decliners by a slim margin on the New York Stock Exchange, where volume totaled 371.67 million shares as of 4 p.m., up considerably from Monday’s listless pace, which may have exaggerated that session’s advance.
Among market highlights:
* ITT lost 7 7/8 or 14% of its value at 48 1/8 after it warned that its quarterly results will be below Wall Street’s expectations because of weak revenues from its casinos.
* Ford Motor lost 3/8 to 31 5/8. It said its Latin American operations will suffer a loss in the second half that will be roughly twice as large as the region’s first-half loss of $130 million. Brazil makes up the largest portion of Ford’s Latin American operations. General Motors, which also has substantial Brazilian operations, was down 3/8 to 47 7/8. Chrysler fell 1/2 to 28 1/4. It recently announced plans to spend $315 million for its first Brazilian assembly plant.
Overseas, Tokyo’s Nikkei stock average rose 1.8%, Frankfurt’s DAX index rose 0.9%, and London’s FTSE-100 rose 0.1%.
Market Roundup, D6
