Stocks Surge as Rate Hike Fears Subside; Yields, Gold Fall
Stocks rallied sharply Thursday for the first time in nearly two weeks as bond yields fell, amid growing hopes that the Federal Reserve won’t raise short-term interest rates when policymakers meet Tuesday.
The Dow industrials gained 123.47 points, or 1.2%, to 10,336.95. The gain was only the second in eight sessions for the blue-chip index, but it was the biggest point gain since Sept. 3.
Broader indexes also rose on the last day of the quarter, with the Nasdaq composite up 0.6% and the Russell 2,000 small-stock index adding 1.4%.
Trading was extremely heavy, at more than 1 billion shares on the New York Stock Exchange and on Nasdaq. Winners topped losers by 19 to 12 on the NYSE and by 22 to 19 on Nasdaq.
Despite the latest batch of strong economic data, many analysts believe the Fed will opt to leave interest rates alone.
“You’re not seeing real signs of inflation yet,” said Frank Rachwalski, who manages $26 billion in money market funds at Scudder Kemper Investments in Chicago.
Treasury bond yields fell after inching up in recent sessions. The bellwether 30-year T-bond yield slid to 6.05% from 6.12% on Wednesday. It began the third quarter at 5.97%.
Yields fell even as the dollar surrendered some of its recent gains against the Japanese yen. The dollar closed in New York at 106.77 yen, down 0.21 yen.
The yen’s strength surprised some analysts because of a severe radiation leak at a uranium-processing plant north of Tokyo on Thursday. The accident was expected to trigger a modest flight into dollars as a safe haven.
Meanwhile, gold prices fell again after a spectacular rally early in the week. Prices had shot up after European central banks promised to limit their gold sales for the next five years. But profit takers moved in Thursday, and near-term gold futures in New York slipped $2.70 to $297.90 an ounce.
As for stocks, the market overall attracted buyers despite deep declines in many shares of health maintenance organizations and semiconductor companies.
“The market has looked pretty lousy all week, and my sense is that the end of the quarter brought some people back into it,” said Ned Collins, a trader at Daiwa Securities America.
Among Thursday’s highlights:
* Rebounding tech stocks included Apple Computer, up $4.25 to $63.31; Sun Microsystems, up $1.44 to $93; and Adobe Systems, up $3.38 to $113.50.
But computer chip stocks sank. Traders cited worries about chip plants near the Japanese nuclear accident and reports that memory chip prices have weakened recently.
Micron Technology tumbled $5.50 to $66.50, Vitesse Semiconductor lost $3.63 to $85.38 and Cypress Semiconductor lost $4.25 to $21.50.
* Oil stocks continued to rebound, led by Exxon, up $1.25 to $76, and BP Amoco, up $3.63 to $110.81.
* Many beaten-down industrial stocks rallied, including Paccar, up $2.91 to $50.88; Dow Chemical, up $3.50 to $113.63; and Weyerhaeuser, up $1.31 to $57.63.
* Mattel slumped $1.31 to a 52-week low of $19 on worries the company won’t reach its third-quarter sales goals outside the U.S.
* Market Roundup, C7
