Mixed Day for Stocks as Yields Rise Again
Semiconductor shares rallied again, but stocks finished mixed Thursday as bond yields rose once more after a report indicating strength in housing construction aggravated inflation worries.
The Dow Jones industrial average fell 9.62 points to 5,867.74, its third straight losing session after making two record highs. But the retreat has amounted to less than 22 points, and many investors remain optimistic for a run at 6,000.
Most broad-market measures turned positive after a weak start. The Nasdaq market rose for the 10th straight session, continuing its gradual crawl back toward record levels amid renewed interest in computer-industry shares.
Stocks initially fell as yields rose after the government reported that construction of new homes and apartments unexpectedly shot up in August to the highest level in nearly 2 1/2 years. That report is the last major economic reading to appear before the Federal Reserve Board meets on Tuesday to consider interest-rate policy. It spurred worries that rising demand for building materials and home furnishings would pressure an already tight labor market, forcing higher payroll costs that might be passed on to consumers.
So far, there’s been little evidence that retail prices are rising. But analysts have been divided over whether economic growth is slowing enough to contain wage and other production cost pressures without the need for central bank intervention. Higher Fed lending rates would help contain inflation by slowing spending and demand, but that could hurt corporate profits.
The yield on the 30-year Treasury bond--a key determinant of corporate and consumer borrowing costs--rose to 7.04% from late Wednesday’s 7.01%.
Despite the higher rates, stocks started rebounding in the late morning and early afternoon on optimism that the signs of economic growth could translate into better earnings, analysts said.
Declining issues outnumbered advancers by an 8-7 margin on the New York Stock Exchange, where volume totaled 395.88 million shares, about even with Wednesday’s pace.
The Standard & Poor’s 500-stock index rose 1.53 points to 683.00, and the Nasdaq composite index rose 6.38 points to 1,212.09.
Among market highlights:
* Semiconductor shares were among the day’s strongest issues, with Intel continuing its rally on news of strong third-quarter sales. Intel finished up 1 3/8 at 97. Among other chip makers, Micron Technology rose 2 to 27 3/8; Texas Instruments rose 2 1/4 to 52 1/4; LSI Logic rose 1 1/8 to 23 3/4; and Cypress Semiconductor rose 7/8 to 12 3/8.
* House builders and mortgage lenders got a boost from the housing news. Centex rose 1/2 to 32 7/8, and Pulte climbed 1/4 to 25 3/4.
Market Roundup, D6
