Dow Trips on Inflation Fears; Yields Surge
Stocks were mixed Friday as the Dow Jones industrials neared another milestone and then spun downward as fears of inflation and rising interest rates resurfaced, foiling the index’s attempt to reach 11,000.
The Dow fell 89.34 points to 10,789.04, thwarting the blue-chip index’s advance on its latest thousand-point milestone when it was 39 points away. Nonetheless, the Dow surged 10.3% in April, reaching new closing highs 14 times in the month. It was up 99.37 points for the week.
Broader indicators were mixed, with the Nasdaq composite rising 14.41 points to 2,542.85 and the Standard & Poor’s 500 index falling 7.65 points to 1,335.18. Decliners outnumbered advancers 13 to 16 on the New York Stock Exchange.
The Dow, which traded as high as 10,961.71, began sinking after the bond market dropped in response to the Commerce Department’s report that the U.S. economy grew at a strong 4.5% annual rate in the first three months of this year, far above expectations.
Yields on the benchmark 30-year U.S. Treasury bond soared to 5.66% from Thursday’s 5.52% as investors feared the economic strength might reignite inflation and prompt the Federal Reserve to push interest rates higher. Higher rates raised the specter of high borrowing costs and lower corporate profits.
The Dow was down more than 223 points in afternoon trading before regaining ground.
“It looks like the bond market clobbered the stock market,” said David Orr, chief economist at First Union Capital Markets Group in Charlotte, N.C.
Among Dow stocks, American Express slipped $4.69 to $130.69 and J.P. Morgan fell $3.25 to $134.75 as traders feared a rise in interest rates would hurt financial service companies. But technology stocks rallied after three days of losses. Amazon.com gained $3.81 to $172.06 and IBM advanced $4.38 to $209.19.
For the week, the S&P; dropped 1.6%, the Nasdaq composite fell 1.9% and the Russell 2,000 index of smaller stocks gained 0.3%.
Among Friday’s highlights:
* InfoSpace.com jumped $24.69 to $143.31 as the Internet content provider said its first-quarter loss was 3 cents a share, narrower than the expected loss of 14 cents.
* Marimba rose $40.75 to $60.75 as the Mountain View, Calif.-based supplier of technology that lets companies distribute and update software over the Internet soared in its first trading day. The company sold 4 million shares at $20 each Thursday, raising $80 million.
* Apple Computer rose $3 to $46 on optimism that the maker of the iMac home computer will release new products and benefit from rising consumer demand.
* Among Southland companies, Santa Ana’s Corinthian Colleges rose $3.63 to $16.38 as the operator of vocational schools said quarterly profit from operations rose to 25 cents a share, beating the 14-cent average estimate of analysts.
* Dow stock 3M rallied $3.38 to $89 after reporting higher-than-expected first-quarter profit.
Market Roundup, C4
