Bond Yields Dip, Boosting Blue Chips, but Net Stocks Dive
Wall Street was a street divided Monday, with blue chips rallying as bond yields fell, while Internet-related stocks again dragged the Nasdaq market sharply lower.
The first decline in bond yields in nine sessions helped boost the Dow industrials 72.82 points, or 0.7%, to 10,563.33. But the Nasdaq composite slumped 2% to 2,398.31, its lowest level since May 25.
Losers outnumbered winners by 25 to 14 on Nasdaq and by 17 to 13 on the New York Stock Exchange. Trading on both markets remained modest, however.
The Dow’s rise was its first in five sessions and came as investors again snapped up shares of companies whose fortunes tend to swing with the economy’s cycles.
Comments by Federal Reserve Vice Chairwoman Alice Rivlin helped ease concerns that the Fed will raise short-term interest rates at its June 29-30 meeting. Rivlin said inflation worries in the United States are exaggerated.
Fed Chairman Alan Greenspan was silent about the Fed’s rate policy during an appearance before Congress. His remarks focused on the effects of technological advancement in industry.
Business investment in new technology is boosting U.S. productivity and keeping a rein on inflation, Greenspan conceded.
He is expected to comment further on the economy in testimony Thursday--the day after the May consumer price index is reported.
In the bond market, where long-term yields have rocketed in recent weeks on concerns that the Fed will tighten credit to slow the economy, the 30-year Treasury bond yield slipped to 6.10% from 6.16% on Friday, which was the highest since late 1997. Shorter-term yields also dipped Monday.
“This is a good time to be buying,” said Tom Seay of Gradison-McDonald Asset Management in Cincinnati.
Bonds found support after the Bank of Japan intervened in global currency markets by buying dollars to slow the advance of the yen, which has been powered by hopes for a Japanese economic recovery. The dollar surged 2.54 yen to 120.62.
The stronger dollar increased U.S. bonds’ appeal to Japanese investors.
On Wall Street, the rally in blue chips looked suspect to some analysts. “What we’re seeing is simply a low volume bounce off an oversold market, with a strong dollar and a good bond market,” said Charles Pradilla, chief investment strategist at SG Cowen Securities.
Among Monday’s highlights:
* Industrial blue chips leading the Dow higher included Alcoa, up $2 to $65; DuPont, up $2.88 to $70.19; Exxon, up $2.19 to $81.13; Union Carbide, up $2.31 to $53.81; and 3M, up $3.19 to $89.25.
* The Internet sector was hammered, led by America Online, down $9 to $90.50, and EBay, down $29.88 to $136. Also falling were leading online brokerages after Charles Schwab reported weaker May trading activity.
* Major phone stocks gained after Qwest Communications made a competing bid for US West, which already has a merger offer from Global Crossing.
US West jumped $3.13 to $58, GTE gained $3.50 to $69.81 and Bell Atlantic surged $3.56 to $60.88.
* Another major telecom firm, Iridium World, sank 63 cents to $5.38 as the troubled company laid off 15% of its workers.
* Big-name growth stocks losing ground included Pfizer, down $2.38 to $95.13; Clorox, down $1 to $100.25; and American Express, down $3.28 to $118.25.
In commodities, near-term gold futures in New York eased 40 cents to $261.10 an ounce after Germany over the weekend signaled that it would support selling 10 million ounces of International Monetary Fund gold to help poorer nations.
Market Roundup, C14
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How pros are advising clients as market struggles. C6
