Bond Yields at 8-Month Low, Dow at Record on Rate Hopes
Bond yields fell to eight-month lows and the Dow Jones Industrial Average ended in record territory Tuesday for a fifth straight session as investors anticipated continued low interest rates and a serious effort to balance the federal budget.
Recent reports have suggested slowing economic growth with low inflation, convincing many traders that the Federal Reserve Board’s Open Market Committee, which meets today, will leave interest rates untouched through the end of the year.
“The economic picture is almost perfectly mixed. We have middle-of-the-road politics, mediocre economic growth and low interest rates,” said Barbara Marcin, a vice president at Citibank Global Asset Management.
Analysts said that although conditions are good, there is some fear of too big a rush of consumer spending this holiday season, which would risk heating up the economy and thus increase inflation. “Wall Street is saying, ‘Don’t put too much under the tree or you’ll ruin our market,’ ” said Edward Riley, chief investment officer at Bank of Boston Corp.
The Dow industrials rose 10.44 points to close at 6,266.04, making this the longest string of Dow records since the seven-session streak Feb. 5-13. Broader indexes were slightly lower, in part because many technology stocks dropped back after recent strong gains.
The bond market was especially happy about the outlook for interest rates, as the benchmark 30-year Treasury bond yield fell to 6.44%.
Bond traders appeared to be optimistic about numbers from the October producer price index due today and the consumer price index, due Thursday.
Among stocks, advancing issues led decliners by a weak 6-5 margin on the New York Stock Exchange. Of more concern to some, the broad market showed signs of fatigue.
“The Dow is outperforming the Standard & Poor’s,” said John Church, chief investment officer at Glenmede Trust Co. in Philadelphia. “Typically that happens at the end of a bull market, so there are some signs of concern.” The Standard & Poor’s 500-stock index fell 2.31 points to 729.56.
Meanwhile, the Nasdaq composite index closed 6.14 points lower at 1,256.53, hit by late selling in Intel Corp. and other technology stocks.
Intel, which hit a 52-week high at 125 1/8 early in the session on upbeat news about computer chip sales, lost 2 7/8 to 121 on profit taking after recent strong gains.
Analysts said technology stocks were also pressured by Microsoft Chairman Bill Gates’ comments that an array of companies supporting the network computer movement pose the stiffest challenge the software giant has seen in years. Microsoft lost 1 7/8 to 141 3/4. Bucking the trend, Motorola shares rose 2 to 52,
Among Tuesday’s highlights:
* Investors were highly unforgiving of retailers that just met or fell slightly short of earnings targets. Wal-Mart shares dropped 1 3/8 to 25 1/8 after the discount giant reported earnings of 30 cents a share, on the low end of analysts’ expectations.
Home Depot slumped 3 3/8 to 53 3/8 after reporting in-line quarterly results. Industry analysts said some investors had hoped for an even better quarter, while other investors worried about a possible peaking in the housing market.
* Adobe Systems rose 2 1/8 to 39 after releasing its newest version of Photoshop graphics software.
* AT&T; rose 1 1/4 to 38 3/8. The Supreme Court declined a request by federal regulators to reactivate rules meant to pry open local phone monopolies to competition.
* Anchor Gaming slumped 8 7/8 to 30 1/8. The company announced that it is reconsidering plans to expand a Colorado casino, raising questions about Anchor’s growth strategy.
Overseas stock markets rose. In Paris, the CAC index surged 1.09% after French companies Axa and Cie Union des Assurances, Europe’s second- and third-largest insurers, said they will merge through a share swap.
The Nikkei stock index in Tokyo rose 0.67%, the DAX index in Frankfurt added 0.22%, and the FTSE-100 index in London climbed 0.51%.
