Dow Dips, Small Caps Rise; Bond Yields Climb Further
The stock market advanced broadly Tuesday--led by smaller-capitalization stocks--despite another rise in bond yields.
The Dow Jones industrials dipped 10.91 points to 8,187.54, but most other stock indexes rose, as winners topped losers by 16 to 12 on the New York Stock Exchange and by 23 to 18 on Nasdaq.
The Nasdaq composite index surged 16.08 points, or 1%, to a record 1,621.53, as technology stocks continued to gain.
“One week they want the banks, the next week they want the pharmaceuticals. Now it’s technology, which tends to have a lot of fans,” said Scott Bleier, chief investment strategist at money manager Prime Charter.
Also, smaller stocks in general were higher, continuing a trend of recent months that has seen smaller issues outpace their blue-chip brethren.
The Russell 2,000 index of smaller stocks rose 0.7% on Tuesday, while the blue-chip Standard & Poor’s 500 index was up 0.3%.
“The tertiary stocks, those $10 and under, have come to life,” said Ricky Harrington, technical analyst at brokerage Interstate/Johnson Lane in Charlotte, N.C.
“That can be symptomatic of tail-end speculation. Sometimes you see that just before you get a correction,” he said, referring to the waves of profit-taking that often follow a big market rally.
Other analysts, however, believe the move into smaller issues may just be gathering steam.
In any case, the surprise has been that stock investors have chosen to look past the turmoil in the bond market, where yields continued to edge higher Tuesday.
The 30-year Treasury bond yield closed at 6.49%, up from 6.47% on Monday. Yields had rocketed on Friday following a stronger-than-expected July employment report.
Signs of economic strength “will keep the threat of inflation on everybody’s mind,” said Robert Giordano, who manages $900 million of fixed-income investments at Bank Leumi Trust Co.
Also weighing on bonds: The Treasury’s big auction this week. It sold $16 billion in three-year notes on Tuesday at an average yield of 6.04%. Ten-year notes will be sold today, 30-year bonds on Thursday.
Among Tuesday’s highlights:
* The technology rally continued to be led by semiconductor stocks. Intel soared $2.94 to a record $99.69, Micron Technology surged $4.69 to $56.25, Texas Instruments leaped $4.31 to $129 and Advanced Micro Devices was up $1.31 to $38.38.
Other tech winners included Seagate, up $3 to $44.31; Western Digital, up $5.38 to $45.50; Cadence Design, up $2.25 to $49.25; and Cybercash, up $2.75 to $18.50.
* Some retailers rallied further on optimism about consumer spending. Nordstrom jumped $2 to 57 and Circuit City gained 94 cents to $37.38.
* Mirage Resorts surged $2.38 to $28.38 after S&P; said the stock would be added to the S&P; 500 index.
* On the downside, banks were weak as bond yields rose. Wells Fargo lost $2.19 to $271.38 and NationsBank dropped $1.44 to $69.19.
In foreign trading, Mexican shares hit another record, with the key index up 0.9% to 5,183.
In currency trading, the dollar rose to a fresh eight-year high against the German mark after the Bundesbank defied market expectations and held official interest rates steady.
The dollar jumped to 1.880 marks from 1.866 on Monday, bringing its rise against the mark this year to 22%, with a 7.5% rise just since June 1.
The dollar also rose to 119.25 Japanese yen from 118.35.
Elsewhere, supply worries drove palladium prices higher again Tuesday. At the New York Merc, palladium for September delivery rose the $12-an-ounce daily limit to close at $227.60.
