Bond Yields Fall, Stocks Gain in Light Trading
Stocks closed out another winning week with a modest rally Friday, after fresh data provided more evidence the economy is slowing.
The bond market had an even better day, as longer-term yields fell sharply--reflecting investors’ growing conviction that the Federal Reserve is finished raising interest rates.
On Wall Street, the Nasdaq composite index rose 27.98 points, or 0.7%, to 4,234.33, lifting its gain for the week to 4.7%.
The Dow industrials added 23.68 points, or 0.2%, to 11,238.78. For the week the Dow rose 0.4%.
Although trading volume was meager--many investors apparently had already left for the long holiday weekend--analysts noted that the market’s advance Friday continued the encouraging pattern of the last five weeks: slow but steady gains, with more stocks rising than falling.
Winners topped losers by 4 to 3 on the New York Stock Exchange and by 22 to 17 on Nasdaq.
The Nasdaq, Dow and Standard & Poor’s 500 indexes each has risen for five consecutive weeks. That hasn’t happened in 2 1/2 years, according to Bloomberg News.
“Evidence is accumulating that the economy is slowing, and that’s good for the stock market because it takes the Fed out of play,” said Robert Morris, head of stock investments at Lord, Abbett & Co., which manages $33 billion in Jersey City, N.J.
The government said Friday that unemployment rose slightly in August, and a manufacturers’ trade group said activity slowed sharply in the month.
The reports triggered a wave of buying in the Treasury market as investors sought to lock in yields, betting they’ll go lower soon.
The yield on the 10-year T-note fell to 5.68% from 5.73% Thursday, and now is the lowest in more than a year. The two-year T-note yield fell to a nine-month low of 6.07% from 6.16%.
In currency trading, however, the threat of a deeper economic slowdown took the wind out of the dollar’s sails: The dollar posted its biggest drop against the euro in three months and sank to its lowest in two months against the yen.
A strong dollar has helped limit U.S. inflation by keeping import prices down.
Among Friday’s highlights:
* Telecom stocks were hot, after network operator Global Crossing boosted its revenue forecast. Its shares jumped $5.06 to $35.13.
Other telecom winners included Corning, up $12 to $340; Ciena, up $8.44 to $230.13; and Vodaphone jumped $3.19 to $44.31.
AT&T; inched up 25 cents to $31.88.
* Energy stocks were strong as oil and gas prices continued to rise. Natural-gas futures hit a record high. BP Amoco gained 94 cents to $56.19, Equitable Resources jumped $2.38 to $58.69 and Apache gained $1.06 to $64.06.
* Retailers recovered some of the losses suffered Thursday, when many companies reported weaker-than-expected August sales. Wal-Mart rose $1.13 to $48.75 and Target gained $1.44 to $24.63.
* Other strong sectors included biotech, utility and entertainment stocks. The Dow utilities index edged up 0.3% to a record high.
In the entertainment sector, News Corp. jumped $2.75 to $55.38 after announcing a $1.5-billion stock buyback.
* Yahoo slumped $7.56 to $113.94. The No. 1 Internet search service is being forced to offer advertisers lower rates as ad agencies renegotiate deals, the Wall Street Journal reported.
* Hertz tumbled $4.81 to $25.81. The world’s largest car-rental agency said it expects third- and fourth-quarter earnings to fall short of analysts’ estimates because of competitive prices in the car-rental business and canceled flights at United Airlines.
Market Roundup: C6
