Stocks Climb on a Rally in Bond Market
Stocks hitched a late ride Tuesday on a rally in bonds that eased interest rate fears, and the dollar jumped against Japan’s yen.
Cocoa prices bubbled to five-month highs following forecasts of a drawdown in world supplies this year, and cotton prices rose on U.S. Agriculture Department crop estimates.
The Dow Jones industrial average rose 70.25 points to 9,161.77. In the broad market, however, declining issues outnumbered advances 1,565 to 1,370 on active volume of 605 million shares on the New York Stock Exchange.
The Nasdaq composite index rose 12.09 points to 1,860.16, led by tech bellwethers Dell Computer, up $4 to $94.38; Intel, up $2.06 to $84.56; and Microsoft, up $1.50 to $85.69.
The yield on the benchmark 30-year Treasury bond fell below the psychologically important 6% level to 5.97% from 6.03% at Monday’s close.
Bond yields rose as high as 6.04% earlier, before an auction of debt by the government met unexpected demand at its final auction of three-year notes. The government sold $10 billion of notes at a yield of 5.633%. The securities recently yielded 5.60%.
The bond market strengthened as investors fled to quality amid renewed concerns about Asian financial stability, with rumors focused on the Hong Kong dollar in particular. The Hong Kong Monetary Authority denied early rumors that it had instructed banks to stop lending money to speculators betting on a devaluation of the Hong Kong dollar.
Before the bond rally, stocks were locked in a narrow range, with investors looking ahead to April retail sales data and the producer price index due out today and the consumer price index due Thursday for any hints on the direction of interest rates.
“People are fearing that rates are going up, but if the bond market rallies back, that fear subsides,” said Tony Dwyer, chief market strategist at Ladenburg Thalmann.
The Federal Reserve Board’s rate policy group meets on Tuesday. It is expected to leave interest rates unchanged, but recent data showing robust growth and tight labor markets have raised concerns about inflationary pressures, which put some stock investors on edge.
“We are in a standstill pattern until we get past the 19th. I think it’s paralyzed everybody, and given an opportunity to take some profits and stand back,” said Joseph Barthel, chief investment strategist at Fahnestock & Co.
The yen fell broadly after Japan’s Economic Planning Agency said economic conditions in that country are becoming more severe.
In New York, the dollar ended at 134.07 yen, up from 132.75 at Monday’s close. It was at 1.7755 German marks, off slightly from 1.7763, its advance hindered as investors dumped yen for the German currency.
Japanese stocks also ended weaker, with the 225-stock Nikkei average down 0.39% at 15,322.48.
In other overseas markets, London’s FTSE-100 index fell 1.19% to finish at 5,956.7.
Market Roundup, D10
