Broad Rally Lifts Stocks; T-Bond Yield Hits 5.11%
U.S. stocks finished another exceedingly volatile week with a broad rally Friday, even though long-term Treasury bond yields surged and the dollar slid against the Japanese yen.
In Europe, stocks gained after the Bank of England cut a key short-term interest rate. And smaller Asian markets capped off a strong week with another rally.
On Wall Street, the market was led higher Friday by rebounding bank and technology shares, many of which had been pummeled earlier in the week.
The Dow Jones industrials gained 167.61 points, or 2.2%, to 7,899.52 in a rally that gained steam all day.
The Nasdaq composite index surged 73.37 points, or 5.2%, to 1,492.49. But that failed to recoup most of the losses from the prior four sessions. For the week, the Nasdaq index suffered a 7.6% loss, leaving the index down 25.9% from its 1998 peak--which puts it squarely back in bear-market territory, usually defined as a 20% or greater drop.
The Dow was the only major U.S. index to gain for the week. It rose 1.5%. The Standard & Poor’s 500 was off 1.8% for the week, and the Russell 2,000 index of smaller stocks slumped 9%.
Investors had dumped key technology stocks at the start of the week on worries that U.S. businesses will cut capital spending plans for 1999 amid continuing global economic turmoil.
Smaller stocks also were hit as investors continued to flee higher-risk securities of all kinds.
On Friday, however, buyers returned to beaten-up techs. The rally was led by Apple Computer, up $4.31 to $35.13; Intel, up $5.38 to $83.81; and Cisco Systems, up $3.38 to $50.06.
Financial stocks, which also had been hammered again at midweek, snapped back Friday. U.S. Bancorp gained $4.63 to $35.63, Banc One rose $3.81 to $41.44 and Citigroup rose $2.94 to $35.44.
The bond market, however, had a mixed day. Long-term Treasury bond yields continued to soar after hitting 30-year lows on Monday. Traders said many hedge funds hurt by the Japanese yen’s sudden rebound against the dollar this week were suddenly dumping T-bonds to raise cash.
The 30-year T-bond yield ended Friday at 5.11%, up from 4.99% Thursday and 4.71% on Monday.
But shorter-term T-bill yields fell sharply, as money poured into those securities. The yield on six-month T-bills dove to 4.07% on Friday from 4.15% on Thursday and 4.35% on Monday.
“People have decided that the [bond party] party is over” for now, said Lee Cohen, co-manager at CIBC Oppenheimer Corp.
Still, many analysts expect further cuts in short-term interest rates by the Federal Reserve in coming months, and that could bring bond yields down again.
On Friday, European stocks rose after the Bank of England trimmed its key rate to 7.25% from 7.5%. British stocks jumped 2.7%. The Bank of Spain cut rates Tuesday.
Meanwhile, in Asia many smaller markets continued to benefit from the new strength in the Japanese yen, which could alleviate the risk of further currency devaluations in the region.
The dollar fell 2.1 yen to 116.95 on Friday. In one week it has plunged nearly 19 yen.
While Tokyo’s Nikkei stock index fell 1.1% to 12,880 Friday--a new 13-year low--other markets rallied. For the week, Hong Kong shares shot up 7.9%, Singapore 8.5% and South Korea 6.4%.
Among Friday’s highlights:
* Winners topped losers by 19 to 13 on the New York Stock Exchange in continued heavy trading of 878 million shares.
* Some lenders in the “sub-prime” credit market saw their battered shares revive. IndyMac Mortgage rose $3.13 to $13 and Aames Financial gained 38 cents to $2.13, a 21% rise.
* Airline stocks also were hot, leading a rally in shares of companies closely tied to the economy’s health. US Airways soared $7.50 to $47 and Delta gained $3.31 to $86.
* On the downside, investors bailed out of “safe haven” stocks that had rallied sharply recently--such as utilities. The Dow utility index slid 2.8%. Phone utility stocks also were sharply lower.
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Tallying the Losses
Key U.S. stock indexes extended their losses this week, before rallying Friday. Index declines from their 1998 peaks, through Friday:
Dow indus.: -15.4%
S&P; 500: -17.1%
S&P; mid-cap: -25.5%
Nasdaq comp.: -25.9%
Russell 2,000: -35.2%
Source: Times research
