Stocks Get a Lift From Economic Reports
Stocks ended mostly higher Thursday on the latest upbeat economic news. But another surge in long-term Treasury bond yields may have weighed on key share indexes.
The Dow Jones industrial average eked out a 15.29-point, or 0.2%, gain to 10,517.14, after sliding 130 points Wednesday.
The technology-dominated Nasdaq composite closed with a modest loss, off 7.89 points, or 0.4%, to 1,854.14, the index’s fourth straight decline.
But rising stocks outnumbered losers by 20 to 16 on Nasdaq and 17 to 14 on the New York Stock Exchange in moderate trading.
The government’s reports that businesses are rebuilding their inventories and that jobless benefits claims continue to stabilize at sharply lower levels than at the end of last year supported share prices, analysts said.
“The theme here is that the economic recovery is taking hold,” said John C. Forelli, portfolio manager for Independence Investment in Boston. “Everyone is trying to guess the pace of the recovery and which sectors will do best.”
But many bond traders are figuring that economic recovery inevitably will mean higher interest rates: Traders bid the yield on the 10-year Treasury note to 5.41% on Thursday, up from 5.29% Wednesday and the highest since June.
The yield on the two-year T-note jumped to 3.59% from 3.46% on Wednesday. It was 3.03% at the end of last year.
The bond market was hurt in part Thursday by brokerage Goldman Sachs & Co.’s report that Laurence Meyer, a former Federal Reserve governor, told the firm he expects the central bank to raise its benchmark short-term interest rate to 3% by year-end and to 4.75% by late 2003.
The Fed’s rate now is 1.75%. Fed policymakers meet Tuesday and are expected to leave the rate unchanged. But they also are expected to warn that they could tighten credit later this year as the economy revives.
Some investors were dumping Treasury issues Thursday to buy higher-yielding corporate bonds, including the $11-billion bond offering sold Wednesday by GE Capital, traders said.
In commodity trading oil prices jumped again, with the near-term crude contract in New York up 40 cents to $24.56 a barrel, the highest price in nearly six months.
U.S. refineries are expected to soon increase production of gasoline and other fuels after slowing operating rates to a two-year low last week, Bloomberg News reported.
On Wall Street, traders said today’s session could bring more volatility because of the “triple-witching” expiration of futures and options contracts.
Among Thursday’s highlights:
* Gains in some “old-economy” stocks helped the Dow as investors bet on an economic rebound. Eastman Kodak rose $1.35 to $32.35 after reaffirming its first-quarter and full-year earnings outlook. Other winners included Dupont, up 59 cents to $47.59; International Paper, up 95 cents to $44.27; and Caterpillar, up $1.17 to $58.66.
* Shares of some consumer products giants also lured buyers. Avon Products rose 53 cents to $53.52. Nike surged $2.18 to $62.76, a 52-week high.
* Many tech leaders continued to weaken after rallying earlier this month. Software giant Oracle slid 45 cents to $13.44 in advance of its earnings report, issued after the market closed. The company, in the report, cut profit estimates for the current quarter.
Intel dropped 37 cents to $30.97, and Adobe Systems fell 94 cents to $36.59. Lucent Technologies continued to sink, falling 9 cents to $4.83, a new all-time low.
