Weaker Dollar Brings Bonds Down With It
U.S. bond yields on Thursday posted their biggest one-day jump in more than three months as a weaker dollar prompted some investors to sell before the release of today’s November U.S. employment report.
Stocks, however, withstood the bond market’s whiplash, ending mixed, with smaller and more speculative shares showing more strength as traders looked for ways to reinvest profits from blue chips.
The price of the bellwether 30-year Treasury bond saw its biggest loss since Aug. 23, and its yield shot up to 6.50% from Wednesday’s 6.39%. Shorter-term yields also jumped.
The T-bond yield, which hit a nine-month low last week, hasn’t been at 6.50% since Nov. 12.
But on Wall Street, the Dow Jones industrial average closed up 14.16 points at 6,437.10, ending a two-day losing streak. Broader stock measures were mixed but mostly higher. The Nasdaq market rose for the eighth time in nine sessions. The Russell 2,000 index of smaller stocks added 0.95 point to 359.05.
But analysts warned that a stronger-than-expected report on November employment today could wreak havoc for stocks if bond yields soar again.
The dollar continued to weaken on rumors that some Japanese government officials believe it has become too strong. It tumbled to 112.33 yen in New York from 113.07 on Wednesday. stock and bond holdings.
Also Thursday, the Federal Reserve Board’s decision to put off widely expected note and bond purchases weighed on the market, analysts said. Finally, after the markets closed, Fed Chairman Alan Greenspan gave a speech in Washington in which he warned that the Fed must be wary of “irrational exuberance” in financial markets that could ultimately harm the economy.
Among Thursday’s highlights:
* Rising bond yields hurt bank stocks, including Citicorp, down 4 1/4 to 101 5/8; Chase Manhattan, down 1 3/4 to 88 7/8; BankAmerica, down 3 1/8 to 96 3/8; and Fleet Financial, off 2 1/8 to 51 3/4.
* Among Dow components, Philip Morris leaped 3 29/64 to a record 107 7/8. Other top performers in the blue-chip average were cyclical issues that might benefit from a stronger economy. Alcoa rose 1 7/8 to 64 3/8, International Paper rose 1 to 42 3/8 and DuPont gained 1 7/8 to 97 7/8.
* Energy stocks also were broadly higher as crude oil prices jumped again. (Investor Spotlight, D7.) Texaco rose 1 1/4 to 100 3/8, Exxon gained 1 1/8 to 95 and Chevron rose 5/8 to 65 3/4.
