Bond Yields Rise on Expected Jobs Report
Stocks and bonds broke through some key barriers Thursday but quickly gave back most of the day’s gains as investors decided against acting too aggressively before today’s report on employment data.
But the dollar rose to new highs against the Japanese yen and gold prices sank to a 12 1/2-year low.
The Dow Jones industrial average rose 18.15 points to 8,050.16 to notch its fifth winning session in a row, but only with the help of a big gain from Merck and only after surrendering an 81-point gain and dipping into negative territory.
Broad-market indicators finished mixed after retreating from sizable gains that briefly put the Standard & Poor’s 500-stock index in record territory for the first time since a few weeks before late October’s bruising sell-off.
The rally faded as the Treasury market faltered in its own flirtation with a psychological barrier.
The price of U.S. bonds, which have lost much of their momentum after rallying amid the recent turmoil on world equity markets, rose high enough to push the yield on the 30-year Treasury as low as 5.99%.
The yield--a key determinant of the interest charged on various loans--hadn’t been below 6% since January 1996, but finished the day at 6.04%, up from Wednesday’s 6.01%, as investors moved to insulate themselves from potential jolts in today’s employment report.
The monthly reading, which has repeatedly confounded forecasts in recent years, offers key insights into employment costs, which account for two-thirds of a product’s price.
Both the bond and stock markets will be looking for any signs that the labor market is tightening further.
Meanwhile Thursday, the Labor Department said initial unemployment benefits claims fell to a seasonally adjusted 303,000 in the week ended Nov. 29 from a revised 306,000 in the prior week.
And revising an earlier estimate, the Labor Department reported that productivity improved 4.1% in the third quarter. That was down from an estimated 4.5% last month, but still the largest gain in nearly five years. Improving productivity has been pivotal in pushing inflation to a three-decade low by enabling employers to boost wages without raising prices.
“People thought better of being too bullish ahead of what’s traditionally been the most volatile day of the month,” said Ronald J. Hill, investment strategist at Brown Brothers Harriman & Co., noting the Federal Reserve Board will meet again in less than two weeks to consider whether inflationary pressures have grown too severe.
Advancing issues outnumbered decliners by a 7-6 margin on the New York Stock Exchange in heavy trading.
The S&P; 500 fell 3.67 points to 973.10 after surrendering a 6 1/2-point gain that would have beaten by a thin margin the record close of 983.12 on Oct. 7. The NYSE index fell 0.71 point to 509.44 after creeping within one point of record territory.
The Nasdaq composite index fell 1.71 points to 1,613.42, but the Russell 2,000 index of smaller companies rose 1.10 points to 434.91.
Among Thursday’s highlights:
* Merck rose $6.63 to $104.63. The Dow’s other big gainers were JP Morgan, up $2.50 to $122.75, and Goodyear Tire & Rubber, up $2 to $65.63.
* In currency trading, the dollar rose to a fresh 5 1/2-year high against the yen after downbeat economic forecasts from Japanese officials sent Tokyo shares reeling and Japanese interest rates to record lows.
The yield on long-term Japanese bonds fell to a record low under 1.6%, by far the skimpiest bond return available to investors in a major economy. The Tokyo’s Nikkei-225 stock index fell nearly 1.7%.
The dollar closed above Monday’s high, ending at 129.39 yen, up from 128.98. The dollar fell slightly against the German mark to 1.7705, compared with 1.7723.
On commodities exchanges, gold prices slid $6.10 to $286.50.
On overseas exchanges, London’s FTSE-100 closed at 5,082.3, up 111.6 points, or 2.25%. Hong Kong’s Hang Seng index closed at 11,474.94, up 267.36 points, or 2.39%.
Market Roundup, D7
