Bond Yields Hit 2-Year High; Stocks End Modestly Lower
Another day, another two-year high for bond yields.
Continuing nervousness ahead of key economic data sent yields up again Tuesday, and that made for a modestly lower day in the stock market.
The Dow Jones industrial average slid 47.80 points, or 0.5%, to 10,302.13, weighed down in part by declines in stocks that are to be booted out of the index Monday.
In the broader market, the Standard & Poor’s 500 lost 0.9% and the Nasdaq composite eased 0.2%.
Losers topped winners by 19 to 12 on the New York Stock Exchange, but they were nearly evenly matched on Nasdaq.
Some traders said the market could have fared worse, given the latest jump in interest rates.
Bond yields rose across the board. The bellwether 30-year Treasury bond ended at 6.37%, up from 6.35% on Monday and a new two-year high. The yield on two-year T-notes rose to 5.99% from 5.95% on Monday.
“The [bond] market is not ready to rally,” said Sam Paddison, who oversees $12 billion at First Capital Group in Philadelphia.
As long as there’s potential for another Federal Reserve increase in short-term rates this year, the risk is for long-term bond yields to go higher, he said. The Fed next meets Nov. 16.
Alfred Broaddus, Fed Bank president in Richmond, Va., cast a new pall over bonds when he warned that the economy still runs the risk of overheating, despite rising productivity.
A government report Thursday will probably show employment costs, an inflation gauge, rose in the third quarter, following the biggest gain since 1991 in the previous quarter.
Another Thursday report might show the economy expanded at a 4.5% annual pace in the quarter, up from 1.6% in the second quarter.
“Unless the data surprises us over the next few days, the path of least resistance is for a tightening” by the Fed next month, said William Dudley, economist at Goldman Sachs Group.
A decline in consumer confidence, reported Tuesday, didn’t appear to help ease bond traders’ minds about the economy.
On Wall Street, some stocks gained on strong earnings. Lucent Technologies leaped $3 to $62.88 after it reported results. But traders noted that Lucent has slid from $65.75 in mid-October on concern about earnings.
Among Tuesday’s highlights:
* Of the stocks to be kicked out of the Dow, Sears fell $1.88 to $27, Goodyear slumped $3.94 to $41.25, Chevron slid $2 to $88 and Union Carbide lost 50 cents to $59.
As for the stocks replacing them, Microsoft eased 6 cents to $92.38, Intel added 35 cents to $71.44, SBC Communications rose $1.31 to $45.56 and Home Depot dropped $1.25 to $70.69.
* Retail stocks were broadly lower on worries about slowing sales. Federated Department Stores fell $2.94 to $39.06, May Department Stores dropped $2.38 to $32.63 and Limited fell $1.69 to $38.06.
* Internet names helped keep the Nasdaq index’s losses limited. EToys jumped $5.31 to $77.81, Broadcom gained $2.94 to $114.81 and Go2Net rose $2.63 to $59.
* Telecom stocks rising with Lucent included JDS Uniphase, up $9.75 to $146.81; Echostar Communications, up $4.13 to $58.88 and Spectrian, up $2.13 to $31.75.
* Among major tech stocks, IBM rose $1.63 to $95.50, Computer Sciences jumped $4.19 to $64.38 and Cisco Systems gained 75 cents to $67.25.
* Gold stocks plunged as bullion tanked. Barrick Gold tumbled $1.31 to $18.13, and Newmont Mining slumped $2.19 to $22.38.
* Drug stocks also were slammed by profit-taking. Pfizer slid $3 to $37, Schering-Plough lost $2.25 to $45.81 and Bristol-Myers dived $2.75 to $72.06.
Market Roundup, C11
