Bond Yields Climb, Stocks Drop on Inflation Concerns
Wall Street ended broadly lower Friday as bond yields shot higher, amid new reports showing the economy remains robust.
But stocks pared their losses late in the day. The Dow industrials ended down 63.95 points, or 0.6%, at 10,273.00 after falling as much as 152 points.
The Standard & Poor’s 500 index eked out a small gain on the first day of the fourth quarter.
With Federal Reserve policymakers meeting on Tuesday to ponder interest rates, the latest economic news was more than the bond market could take, traders said--even though many experts still believe the Fed will leave short-term rates unchanged.
The 30-year Treasury bond yield surged to 6.13% from 6.05% Thursday, and now is the highest since Sept. 2.
The two-year T-note yield ended at 5.71%, up from 5.59% Thursday and also the highest since Sept. 2.
In the stock market, which sank for most of September under the weight of interest rate worries, fears over corporate earnings and other concerns, losers topped winners Friday by 18 to 13 on the New York Stock Exchange and by 22 to 18 on Nasdaq in continued heavy trading.
But computer-guided buy programs drove a rebound late in the day, according to Birinyi Associates, a research firm.
Traders said some investors may have decided that stocks have gotten cheap enough. And despite the historical concerns about October being a bad month for stocks, analysts note that the fourth quarter often is a winner for the market.
For the week, the Dow lost just 0.1%, though it was the sixth straight weekly loss; the Nasdaq composite also slipped 0.1%.
But there were more reminders Friday that U.S. stocks face increasing competition.
The yen posted its biggest gain against the dollar in almost three weeks on hopes a Bank of Japan survey result Monday will bolster the view that a rebound is taking hold in the world’s second-largest economy. The dollar plummeted to 104.96 yen from 106.77 Thursday.
In Tokyo the Nikkei-225 stock index rose 0.6%.
Also, gold’s rally resumed, with near-term futures rising $5.80 to $303.70 an ounce.
Among Friday’s highlights:
* Tech stocks were mixed after Hewlett-Packard said parts-supply problems could hamper fourth-quarter sales. HP fell $3.38 to $87.38 and IBM lost $3.25 to $117.75. But Micron Technology rebounded $5 to $71.50, Motorola added $1.06 to $89.06 and Cisco Systems edged up 31 cents to $68.88.
Internet shares also ended mixed. America Online gained $3.81 to $107.88 while Yahoo slid $4.06 to $175.44.
* Financial stocks were mostly lower on interest rate worries. American Express skidded $3.63 to $131.38, Merrill Lynch slid $1.50 to $65.88 and Citigroup eased 75 cents to $43.25.
* Some health-maintenance organization shares rebounded a bit after diving Thursday on fears over potential class-action lawsuits. Aetna gained $2 to $51.25 and Cigna added $1.69 to $79.44. But United Healthcare slid $2.94 to $45.75 and Wellpoint eased 38 cents to $56.63.
Meanwhile, drug stocks rallied. Eli Lilly surged $4.38 to $68.56 after the company won Food and Drug Administration approval to sell its Evista drug for a new use in treating osteoporosis in post-menopausal women.
And Merck rose $3.31 to $68.13. Its drug Fosamax, approved for prevention and treatment of osteoporosis in older women, also appears to benefit men with the disease, according to the first definitive study of its kind.
* Some depressed consumer products stocks attracted bargain-hunters. Gillette surged $2.19 to $36.13, Colgate-Palmolive rose $2.06 to $47.81 and Coca-Cola gained 81 cents to $49.06.
* DuPont rose $2.50 to $63 after denying reports that the company had suggested its third-quarter earnings would fall short of expectations.
Market Roundup, C4
