Stocks Mixed as Yields Shoot Up
Is the stock market getting bored with rising interest rates?
It looked that way Monday, as a fresh surge in Treasury bond yields failed to rile Wall Street.
Major stock indexes were mixed, and the broad market was only modestly lower, even as the latest economic data pushed bond yields to seven-month highs.
The Dow Jones industrials edged up 18.20 points to 9,324.78. The Nasdaq composite also was higher, adding 7.15 points to 2,295.18.
The Dow recovered from a drop of 83 points early on.
The stock market also ignored another plunge in Brazil’s currency, the real.
There was nothing but bad news from the bond market: The 30-year Treasury bond yield jumped to 5.68% from 5.58% on Friday, and now is the highest since July 31.
“The bond market boys are nervous. They’re totally freaked,” said Barry Hyman, analyst at Ehrenkrantz King Nussbaum.
Yields have been rocketing in recent weeks as bond traders fear that the strong economy will compel the Federal Reserve to tighten credit sooner than later.
So why didn’t the stock market take a bigger hit Monday?
Analysts noted that losers still topped winners on the New York Stock Exchange and on Nasdaq--by margins 16 to 14 and 22 to 18, respectively.
But sleepy trading volume suggested no urgency to sell. “We’re in a tug-of-war between those who think the market is overvalued and bargain hunters who want to buy it at every dip,” said Ricky Harrington, a technical analyst at Interstate/Johnson Lane.
And some investors may be betting that the rise in yields is coming to an end. Indeed, William Gross, who oversees $150 billion in bond investments for Pacific Investment Management in Newport Beach, said Monday that the Treasury market is nearing “good value,” and that Pimco is getting ready to put new money to work in bonds.
In foreign trading, Brazil’s currency sank to a record low of 2.15 to the dollar, from 2.07 on Friday, as currency traders anticipated a scramble for dollars by companies repaying maturing debts.
The Brazilian stock market, however, still rallied 3.2%.
Among Monday’s highlights:
* Some industrial stocks gave the market a boost, as investors looked for companies poised to benefit from continued strong U.S. growth. Caterpillar jumped $3.63 to $49.19, Dupont rose $1.13 to $52.44 and Goodyear gained $2.19 to $48.25.
* Major tech stocks continued to lose ground after Friday’s sell-off reflecting weaker-than-expected sales at Compaq. Compaq lost $1.84 to $33.53, Intel fell $2.88 to $117.06, Apple lost $1.06 to $33.75 and IBM gave up $1.38 to $168.38.
But many Internet stocks turned hot again, with Amazon.com up $4.88 to $133, Yahoo up $6.63 to $160.13 and Go2Net up $7.50 to $66.
And Quantum soared $3.13 to $19.56 as the disk drive maker said it will expand its network storage-system business and split its common shares into two stocks that will track the two businesses’ performance.
* Some financial stocks benefited as long-term interest rates rose faster than short-term rates, widening the spread between the two. A wider spread lowers financial companies’ cost of funds while enabling them to raise lending rates. Citigroup gained $2.50 to $61.25, BankAmerica rose $1.88 to $67.19 and American Express was up $3 to $111.50.
Market Roundup, C12
