Stocks Register Gains Despite Jump in Yields
The stock market advanced broadly Friday as investors brushed aside rising bond yields and a landmark ruling against the tobacco industry.
The Nasdaq composite index surged 71.32 points, or 1.7%, to 4,246.18, lifting its gain for the week to 5.5%.
The Standard & Poor’s 500 index rose nearly 1% on Friday and was up 2.2% for the week.
Weighed down by profit taking in drug stocks, the Dow industrials added just 24.04 points Friday, or 0.2%, to 10,812.75. The Dow rose 1.7% for the week.
The big surprise was how many stocks were bid up Friday even as bond yields rose.
Winners topped losers by 16 to 13 on the New York Stock Exchange and by 21 to 17 on Nasdaq.
Stock buyers ignored a surge in Treasury yields after a bigger-than-expected gain in retail sales in June fanned concern the economy isn’t slowing enough to discourage the Federal Reserve from raising interest rates again.
“The market was banking on a clear slowdown,” said Raye Kanzenbach, fund manager at Insight Investment Management in Minneapolis. “Now the question is how much of a slowdown this really is.”
The two-year T-note yield jumped to 6.43% from 6.29% on Thursday. The 10-year T-note rose to 6.10% from 6.00%.
Bonds sold off even though the Labor Department reported that the producer price index, which measures inflation pressures before they reach consumers, rose 0.6% in June. While that gain was bigger than expected, it mostly was due to a sharp rise in energy costs.
The core rate of wholesale inflation fell 0.1% in June.
Some analysts said the week’s rally in stocks, stoked by some strong corporate earnings reports, reflects a justified bullishness--albeit with some caution on the side.
“Earnings are fine, inflation is fine, the world is in good shape, but people are still a little nervous about the stock market,” said Alfred E. Goldman, director of market analysis at A.G. Edwards & Sons Inc. in St. Louis. “We had a very tough spring and that forced many people to be cautious.”
Earnings in the tech sector, in particular, should continue to please investors, said Brian Ashford-Russell, head of tech funds at London’s Henderson Investors.
The tech rally this week put the Nasdaq index back into positive territory for the year. It’s up 4.4% year to date.
Beaten-down Internet stocks led Nasdaq again Friday, with Amazon.com gaining $7.50 to $42.50, or 21%, after Salomon Smith Barney analyst Tim Albright said fears that the company could run out of money are unfounded.
Among other Net stocks, Yahoo gained $5.44 to $128, Go2Net rose $2.38 to $53.75 and Spyglass gained $2.06 to $38.38.
Semiconductor shares were mixed, with Altera gaining $8.38 to $119.44 after reporting better-than-expected earnings. But Vitesse Semiconductor fell $11.13 to $75.56 after it matched expectations.
California Amplifier slid $11.06 to $42.94, even though the firm denied rumors that its quarterly earnings will miss estimates.
Tobacco stocks were down modestly on news of the latest jury verdict against them. Philip Morris was down 38 cents to $24.50. R.J. Reynolds fell 94 cents to $26.19.
J.P. Morgan, which reported strong earnings Thursday, gained $4.56 to $128.69. Banks in general were higher, despite rising yields.
Merck fell $1.88 to $67.19 after a federal advisory panel told the Food and Drug Administration that the company’s Mevacor is a safe and effective treatment to reduce high cholesterol but that it shouldn’t be sold without a prescription.
Other drug stocks also lost ground in profit taking, including American Home Products, down $3.50 to $54.50, and Johnson & Johnson, down $3.44 to $91.81.
Market Roundup, C4-C5
